Sole trader tax deductions: What you can and can’t claim

Setting up a business as a sole trader comes with a wide range of responsibilities, but understanding your tax deductions doesn’t have to be complex. Knowing what you can and can’t claim affects how much tax you pay and helps you stay compliant with ATO rules.

By claiming all allowable expenses, you can reduce your taxable income, which means you pay less tax.   

One of the most important things you can do is to maintain clear, organised records and receipts for every deductible business expense. Without them, you may miss out on deductions or face complications if audited by the ATO.

If eligible, you could claim the following business-related expenses (not exhaustive) as deductions to reduce your taxable income and potentially increase your tax return.

Jump to section:

1. Business expenses
2. Travel and vehicle expenses
3. Training, education and professional development
4. Professional memberships and subscriptions
5. Depreciating assets
6. Marketing, advertising and promotional costs
7. Professional services and consulting fees
8. Bank fees, interest and business loans
9. Employee costs
10. Debt and debt recovery
11. Superannuation contributions
12. Business insurance
13. Rent, home office and premises expenses
14. GST

This guide will help you navigate the most common types of deductions available to sole traders – including business costs, travel, marketing, GST and more – meaning you can take full advantage of what you’re entitled to claim.

Types of tax deductions sole traders can claim

If you’re a sole trader wondering what business expenses can be claimed, while not exhaustive, this list provides a useful starting point.

1. Business expenses

These are your everyday business operating costs and largely depend upon the type of business you’re operating.

Examples of tax deductable business expenses may include:

• Rent for office space or home office expenses (e.g. a portion of rent, utilities, internet, etc.)
• Items such as stationery, printing, postage, office furniture, digital product subscriptions and utility bills for your business premises.

Important: remember that expenses must be directly related to your business activities and not for personal use. Please refer to ATO.gov.au on rules relating to home office expenses.

2. Travel and vehicle expenses

You may be able to claim costs related to business travel including vehicle fuel, repairs, servicing, parking and tolls.

• If you use your personal vehicle for business, you could claim a portion of the expenses based on a logbook or the cents-per-kilometre method.
• Business trips involving flights, accommodation and meals may also be deductible.  However, you need to keep logbooks on activities and purposes of travel.

3. Training, education and professional development

• Expenses for upskilling, such as attending industry conferences, short courses, webinars and certifications related to your existing business operations can be claimed.
• Courses that are unrelated to your current business activities may not be tax deductible.

4. Professional memberships and subscriptions

• You can claim fees for memberships to recognised trade or professional associations and industry-related publications or software and digital products that support your work, opens in new window.
• Speak with your registered tax agent if you’re unsure whether a particular subscription or membership is tax deductible.

5. Depreciating assets

• Assets that provide long-term use like laptops, tools or furniture could be written off over time through depreciation.
• The ATO offers simplified depreciation rules for small businesses and sole traders, opens in new window, including instant asset write-offs under certain thresholds.

6. Marketing, advertising and promotional costs

Advertising through traditional or digital channels such as Google Ads, Facebook ads and print media, as well as sponsorships, website hosting, SEO tools, promotional merchandise and signage are generally deductible if they promote your business.

7. Professional services and consulting fees

Payments to professional services like accountants, lawyers, consultants or bookkeepers who provide advice or services for your business are generally deductible.

• This includes advice on tax, legal compliance or business planning. 
• Professional advice relating to setting up new businesses or legal structures may not be deductible.

8. Bank fees, interest and business loans

• You can potentially claim bank fees on business transaction accounts, interest on business loans or credit cards and overdraft charges.
• Keep in mind that only costs directly related to business transactions are considered to be eligible.

9. Employee costs

• This includes employee wages and super contributions, opens in new window, in addition to staff training, work uniforms and fringe benefits.
• If you hire contractors, their payments may also be deductible under certain reporting obligations.

10. Debt and debt recovery

• Bad debts that have been included as assessable income in a previous year that cannot be recovered may be written off and claimed as tax deductions.
• Documentation is essential to prove recovery attempts.

11. Superannuation contributions

Understanding sole trader superannuation is essential.

• You may be able to claim personal super contributions made to your own fund if you submit a ‘Notice of intent to claim’ form with your superannuation provider and meet the eligibility criteria.
• Contributions can help reduce your taxable income while supporting your retirement in the future.

12. Business insurance

• Premiums for business-related insurance policies, opens in new window such as public liability, professional indemnity, asset insurance and income protection are often tax deductible.
• Life insurance is generally not tax deductible.

13. Rent, home office and premises expenses

• If you operate from a commercial property, rent and outgoings are deductible.
• For home-based businesses, opens in new window, you may be able to claim a portion of mortgage interest, rent, electricity and internet costs based on the proportion of your home used for business purposes.

Please refer to specific information from ATO.gov.au on guidance and substantiation requirements.

14. GST

If you're registered for GST, you may be able to claim GST credits on business-related purchases.

It’s important to retain tax invoices that comply with ATO requirements and track input and output tax carefully.

How do I claim a tax deduction as a sole trader?

Deductions can be claimed on your individual tax return under the ‘Business and professional items’ section. You can do this yourself through myTax, opens in new window, or with the assistance of a registered tax professional.

Consider the following rules when claiming tax deductions:

1. The expense must be directly related to your business, and not private.
2. For instances where a deduction is related to both a personal and business expense, ensure you only claim for the business portion of it.
3. It’s essential to have records as proof for any business expenses you intend to claim.

What expenses aren’t tax deductible?

Not every cost can be claimed as a business expense. Some examples of non-deductible expenses include:

• personal or private expenses unrelated to business
• fines and penalties, for example, traffic or parking fines
• entertainment such as meals, drinks or social events
• costs incurred before your business started
• clothing that isn’t protective or part of a uniform
• capital improvements, though depreciation may apply.

It's essential to draw a clear line between personal and business use and to only claim the business-use portion.

Stay organised and maximise your deductions

To ensure you’re getting the most from your tax deductions:

• keep digital or physical copies of receipts and invoices
• use dedicated bookkeeping tools to track expenses accurately
• work with a professional to ensure full compliance and avoid missing claims.

Next steps

• Explore NAB Bookkeeper  – a cloud-based accounting software synched in real time with eligible NAB business accounts. It’s designed for small businesses to help automate bookkeeping and manage your business finances more easily.
• Learn more about paying tax as a sole trader to understand your obligations.
• Consider whether you need a separate business bank account as a sole trader.

The more proactive you are with your records, the more prepared you’ll be at tax time and the more confident you’ll feel about the financial health of your business.