Article Summary: 

Understanding what you can claim as a business deduction in Australia is one of the most effective ways to improve your tax position. While many business owners focus on obvious deductions like home office expenses, there are often missed opportunities across expenses, structure, and timing. In this guide, we break down common business deductions, what the ATO expects, and how to make sure your claims are both compliant and optimised for the 2025 to 2026 financial year. 

Home Office Expenses Are Just One Piece of the Puzzle 

For the 2025 to 2026 financial year, there are two main ways to claim working from home If you have read our guide on home office expenses and ATO requirements, you already understand how to claim working from home correctly. 

However, many business owners stop there. 

At Cosca, we often see business owners focus on individual deductions, when the bigger opportunity is in how their entire tax position is structured. 

Home office deductions are only one part of your overall tax outcome. 

What makes the biggest difference is how your: 

  • expenses  
  • structure  
  • timing  

and record keeping all work together. 

What Business Expenses Can You Claim in Australia? 

The ATO allows you to claim deductions for expenses that are directly related to earning your business income, provided they are not private in nature and you have records to support them. 

Common business tax deductions include: 

Operating expenses 

  • rent or commercial lease costs  
  • electricity, gas and utilities  
  • internet and phone  
  • software subscriptions  
  • office supplies  

Vehicle and travel expenses 

  • fuel and vehicle running costs (business use only)  
  • work-related travel  
  • accommodation for business trips  
  • meals when travelling overnight for business  

If business travel is for six or more consecutive nights, a travel diary may be required. 

Employee and contractor costs 

  • wages  
  • superannuation contributions, provided employer obligations are met correctly and on time  
  • contractor payments  
  • training and development connected to the business  

From 1 July 2026, Payday Super will apply, meaning employers must pay superannuation guarantee contributions at the same time as salary and wages. 

Professional services 

  • accounting fees  
  • legal services  
  • consulting and advisory  

Asset purchases 

  • laptops, tools and equipment  
  • office furniture  
  • machinery  

These may be claimed through immediate deductions or depreciation over time, depending on the asset and current ATO rules. 

For the 2025 to 2026 financial year, eligible small businesses with aggregated turnover under $10 million may be able to immediately deduct the business-use portion of eligible assets costing less than $20,000 per asset, provided the asset is first used or installed ready for use between 1 July 2025 and 30 June 2026. 

What Business Owners Often Miss 

At Cosca, we regularly see business owners who are claiming basic deductions, but missing more strategic opportunities. 

Common missed opportunities include: 
1. Poor expense categorisation 

Expenses are recorded, but not structured in a way that improves tax outcomes. 

2. Ineffective business structure 

Your structure, whether sole trader, company or trust, can significantly impact how much tax you pay. 

3. Timing of purchases 

When you incur expenses can affect your tax position. 

4. Underclaiming legitimate deductions 

Many business owners are overly conservative due to uncertainty. 

5. Overclaiming without evidence 

This increases audit risk and can lead to penalties. 

The goal is not to claim more. It is to claim correctly and strategically. 

What Poor Tax Planning Can Cost You 

This is where many business owners underestimate the impact. 

Poor tax planning can result in: 

  • paying more tax than necessary each year  
  • missing legitimate deductions  
  • increased ATO audit risk  
  • unnecessary cash flow pressure  
  • making business decisions without clear financial visibility  

In many cases, the cost of getting it wrong is significantly higher than the cost of getting advice early. 

How the ATO Assesses Business Deductions 

The ATO applies a simple principle: 

You can claim a deduction if the expense is directly related to earning your income and you have records to support it. 

In practice, this comes down to three things: 

1. Connection to income 

You must show how the expense relates to your business activity. 

2. Apportionment 

If an expense is partly personal and partly business, only the business portion is deductible. 

3. Evidence 

You must have documentation to support your claim. 

This is where many claims fail during reviews. 

Record Keeping Requirements for 2026 

Strong record keeping is essential. 

You should keep: 

  • receipts and tax invoices  
  • bank statements  
  • accounting software records  
  • usage logs for shared expenses  
  • asset purchase details  
  • depreciation schedules  

Records must generally be kept for at least five years. 

When DIY Tax Stops Working 

Many business owners start by managing their own tax. 

That works up to a point. 

It usually stops working when: 

  • your business is growing  
  • your tax bill is increasing  
  • you are unsure what you can claim  
  • you are making larger financial decisions  
  • you want to plan ahead rather than react at tax time  

This is where strategy becomes more valuable than compliance alone. 

When Should You Speak to an Accountant? 

You should consider speaking to an accountant if you are: 

  • growing your business  
  • unsure what you can claim  
  • making large purchases or investments  
  • reviewing your business structure  
  • concerned about compliance or audit risk  
  • looking to reduce tax legally  

The biggest opportunities come from planning, not just lodging. 

How Cosca Helps Business Owners with Tax Planning 

At Cosca, we go beyond preparing tax returns. 

We work with business owners to: 

  • identify missed deductions  
  • structure finances for better outcomes  
  • plan ahead for tax efficiency  
  • reduce compliance risk  
  • align business and personal financial goals  
Start with a Strategic Accounting Review 

If you are unsure whether your business is claiming correctly, a review can help you: 

  • uncover missed deductions  
  • identify tax saving opportunities  
  • reduce audit risk before lodgement  
  • gain clarity on your financial position  

Connecting Back: Are You Claiming Your Home Office Correctly? 

If you are working from home, your home office claim is one part of your overall tax position. 

Make sure you understand: 

  • whether the fixed rate or actual cost method is right for you  
  • what records you need to keep  
  • what the ATO expects  

Read our full guide on Home Office Expenses and ATO Requirements to ensure you are claiming correctly. 

FAQs

What is the most common business deduction mistake? 

Claiming expenses without proper records or incorrectly claiming personal expenses as business costs. 

Can I claim everything I use in my business? 

No. You can only claim expenses that are directly related to earning income, are not private in nature, and are supported by evidence. Where some items may be used for personal use, Fringe Benefits Tax may apply.  

Do I need receipts for all business expenses? 

In most cases, yes. The ATO expects clear documentation for claims. 

Is it worth hiring an accountant for a small business? 

Yes. Not only is an accountant required to lodge your business taxes they should help identify opportunities, reduce risk, and improve your overall position. 

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