Sole Trader Tax Deductions Australia: The Complete 2026 List (50+ Things You Can Claim)

Why Claiming Every Deduction Matters#

For a sole trader on the 30% marginal tax rate (taxable income $45,001–$135,000 in 2025–26), every $1,000 of legitimate deductions saves $300 in income tax — plus another $20 in Medicare levy at 2%. For someone in the 37% bracket ($135,001–$190,000), the saving is $390 per $1,000. In the top 45% bracket (over $190,000), it's $470 per $1,000.

Most sole traders leave thousands of dollars on the table every year. Not because they're cheating, but because they don't know what they can claim, they don't keep receipts, or they're scared of getting it wrong. This guide fixes that.

You'll get every deduction available to Australian sole traders for the 2025–26 financial year, the rules that govern them, the records you need to keep, and worked examples so you can apply each one to your own business.

The 3 Golden Rules of Deductibility#

Before we get to the list, every deduction the ATO accepts has to pass three tests. If any one fails, the deduction is denied — and the ATO can apply penalties on top.

Rule 1: It Must Be Connected to Earning Income#

The expense must be directly related to producing your assessable business income. Buying a tablet to manage client invoices passes. Buying the same tablet for your kids passes only as a gift, not a deduction.

Rule 2: It Must Not Be Private or Domestic#

Personal expenses — your weekly groceries, family clothing, school fees — are never deductible, even if you're self-employed. Where an expense is partly business and partly private (vehicle, phone, home internet), you can only claim the business portion.

Rule 3: You Must Have Records#

The ATO will not take your word for it. You must hold a receipt, invoice, bank statement, or other written evidence for every claim, and keep it for five years from the date you lodge the return.

If your total work-related expenses are under $300, you don't need receipts — but you must still be able to show how you calculated the figure.

The Sole Trader Tax Deductions List#

Home Office Expenses#

If you run your business from home — even part of the time — you can claim a portion of your household running costs. There are two ATO-approved methods:

Fixed rate method (FY2025–26): 70 cents per hour of work performed at home. Covers electricity, internet, phone, stationery, computer consumables, and depreciation of office equipment under $300. You must keep a record of hours worked from home (a diary, spreadsheet, or timesheet for the full year).

Actual cost method: Claim a percentage of actual bills based on the floor area of your dedicated workspace. More work, but often a bigger deduction if you have a clearly delineated home office. You can claim:

1. Electricity and gas — proportional to office area and usage
2. Internet — business percentage of monthly bills
3. Phone — business percentage of mobile and landline bills
4. Cleaning of the office area
5. Repairs to office furniture and equipment
6. Office furniture depreciation (desk, chair, shelving)
7. Office equipment depreciation (computer, printer, monitor)
8. Stationery and consumables (paper, pens, ink, toner)

Note: as a sole trader you generally can't claim occupancy costs (mortgage interest, rent, council rates, insurance) unless your home is your principal place of business and you have an area used exclusively for business — which can have CGT implications when you sell. Get advice before claiming occupancy costs.

Vehicle and Travel#

If you use your car for business, you can claim:

9. Cents-per-kilometre method — 88 cents per business kilometre (FY2025–26), capped at 5,000 km per year. Simple, no logbook needed, but you must be able to show how you calculated the kilometres
10. Logbook method — claim the business percentage of all running costs (fuel, servicing, registration, insurance, depreciation, lease payments). Requires a 12-week logbook every five years
11. Tolls and parking for business trips
12. Public transport, taxi, ride-share for client meetings or work travel
13. Domestic flights for business travel
14. Hotel accommodation when travelling for business overnight
15. Meals when travelling overnight (subject to ATO reasonable amounts)
16. International travel for genuine business purposes (e.g., trade shows, supplier visits)

Travel between home and your usual place of work is not deductible — that's commuting. Travel from home to a client site, between client sites, or to deliver goods is deductible.

Tools, Equipment, and Technology#

17. Computers and laptops used for business
18. Tablets and smartphones (business portion)
19. Printers, scanners, monitors
20. Trade tools and equipment specific to your work (a chef's knife set, a sparky's test meter, a photographer's lens)
21. Software licences — Microsoft 365, Adobe Creative Cloud, accounting software
22. Cloud storage and backup
23. Web hosting and domain registration
24. Cameras, microphones, lighting (for content creators and photographers)

Items costing less than $300 can be deducted in full in the year you buy them. Items costing more must be depreciated over their effective life — unless you qualify for the instant asset write-off (currently $20,000 for small businesses with turnover under $10m for FY2025–26), in which case you write off the entire cost in the year of purchase.

Phone and Internet#

25. Mobile phone bills — business portion based on usage
26. Home internet — business portion based on usage
27. Office landline (if 100% business use)
28. Phone handsets — depreciated or written off if under $300

Keep a four-week representative diary of business vs personal use to substantiate the percentage.

Professional Development#

29. Courses, seminars, conferences directly related to your current business activities
30. Industry-specific certifications and renewals
31. Professional development books and journals
32. Online courses and subscriptions (Udemy, LinkedIn Learning, MasterClass for relevant skills)
33. Travel to attend training (if not local)

The course must maintain or improve skills for your current income-earning activities. A course to qualify for a different career — for example, a tradie studying for a real estate licence — is not deductible. A tradie taking an advanced asbestos handling course is deductible.

Marketing and Advertising#

34. Website design, build, and maintenance
35. Hosting and domain renewals
36. Google Ads, Meta Ads, LinkedIn Ads spend
37. SEO services and content writing
38. Logo and brand design
39. Business cards, flyers, signage
40. Print ads, sponsored content, billboards
41. Email marketing platforms — Mailchimp, ActiveCampaign, etc.
42. Photography and video for marketing

For more on building a marketing engine on a budget, see our guides on email marketing for small business and getting Google reviews.

Subscriptions and Software#

43. Accounting software (OneBookPlus, Xero, MYOB, QuickBooks)
44. CRM platforms
45. Project management tools — Asana, Trello, Notion, Monday
46. Communication tools — Slack, Zoom, Microsoft Teams
47. Industry software — CAD for architects, Final Cut Pro for editors, Photoshop for designers
48. Stock photo and font subscriptions
49. Streaming services or research tools if directly relevant to your business

Banking and Finance#

50. Business bank account fees
51. Credit card fees (on a card used solely for business)
52. Merchant fees — Stripe, Square, PayPal, EFTPOS
53. Loan interest on business loans
54. Lease payments on business assets
55. ATM and transaction fees on business accounts
56. Foreign currency conversion fees for business transactions

You cannot claim the principal repayments on a business loan — only the interest portion.

Insurance#

57. Public liability insurance
58. Professional indemnity insurance
59. Business contents insurance
60. Workers compensation premiums (if you have employees or work on certain sites)
61. Income protection insurance — premiums are deductible to the individual, but benefits paid out are taxable
62. Vehicle insurance (business portion)

Note: life insurance held in your personal name is generally not deductible. Inside super, the rules are different — speak to your adviser.

Office and Premises#

63. Commercial rent for a shop, office, or warehouse
64. Utilities at commercial premises (electricity, gas, water)
65. Cleaning services
66. Repairs and maintenance to business premises (not capital improvements)
67. Council rates and land tax for commercial premises
68. Strata and body corporate fees for commercial property
69. Security alarms and monitoring
70. Office furniture (desks, chairs, shelving — depreciate if over $300)

Stationery and Consumables#

71. Paper, pens, notebooks, folders
72. Printer ink and toner
73. Postage and courier costs
74. Packaging materials (boxes, bubble wrap, tape) for product businesses
75. Cleaning supplies for the workspace

Professional Services#

76. Tax agent fees for the previous year's tax return
77. Bookkeeper fees
78. Accountant fees for business advice
79. Legal fees related to your business operations
80. Business consultant fees
81. BAS agent fees

Tax preparation fees are deductible in the year you pay them, not the year they relate to. Keep the receipt from your accountant for next year's return.

Subcontractors and Wages#

82. Payments to subcontractors for genuine business services
83. Wages paid to employees (gross amount including PAYG withheld)
84. Superannuation paid on behalf of employees
85. Workers compensation premiums for staff
86. Recruitment costs

Personal "wages" you pay yourself as a sole trader are not deductible — your profit is your income. You can only deduct payments to genuine third parties.

Stock and Cost of Goods Sold#

87. Inventory purchases (recorded against sales when sold)
88. Freight and import duties on stock
89. Direct materials consumed in producing goods or services
90. Manufacturing wages (for product businesses)
91. Packaging materials sold with goods

Bad Debts#

92. Genuinely uncollectable invoices that have been included in your assessable income, where you have made reasonable recovery attempts and physically written the debt off in your books before 30 June. You can also claim back the GST you paid on the original sale.

Depreciation#

93. Vehicles — typically depreciated over 8 years (or written off if under instant asset write-off threshold)
94. Office equipment — computers (4 years), printers (5 years), phones (3 years)
95. Furniture — desks, chairs (10 years)
96. Trade tools — depending on type
97. Buildings and capital works — claimed over 25 or 40 years at 2.5% or 4% per year

Superannuation#

98. Personal concessional contributions to your own super, capped at $30,000 per year for FY2025–26 (or higher with carry-forward unused cap if eligible). You must lodge a notice of intent to claim a deduction with your super fund before lodging your tax return.
99. Super for employees — including contractors deemed employees for super purposes

This is one of the most powerful deductions available. A sole trader on $120,000 contributing the full $30,000 saves around $11,100 in tax — and the money goes into their own retirement.

Industry Workwear and PPE#

100. Compulsory uniforms with employer logos
101. Protective clothing — high-vis vests, steel-cap boots, hard hats
102. Sun protection — sunscreen, sunglasses, sun hats for outdoor workers
103. Specialist clothing — chef whites, lab coats, theatre scrubs
104. Cleaning and laundry of the above

Note: ordinary business attire (suits, dresses, shoes) is not deductible, even if you only wear it to work. The ATO is firm on this — corporate clothes have private benefit.

Memberships and Subscriptions#

105. Trade or professional association memberships
106. Industry journal and magazine subscriptions
107. Union fees and professional body fees
108. Trade publications

Entertainment#

The bad news: most client entertainment is not deductible for sole traders. Lunches, drinks, and events with clients are private expenses in the ATO's view, even if you discussed business.

Donations#

109. Cash donations of $2 or more to deductible gift recipients (DGRs) — you must keep the receipt; the charity must be on the ATO's DGR list

Donations cannot create or increase a tax loss.

Income Protection Insurance#

110. Premiums on income protection policies held in your own name — fully deductible. (Premiums for life insurance, trauma, or TPD held personally are not deductible.)

Things You CAN'T Claim#

A short list of expenses sole traders commonly try to claim — and why they're denied:

• Wages paid to yourself — sole traders are not employees of their business
• Client entertainment — meals and drinks with clients are not deductible
• Travel between home and your usual workplace — that's commuting
• Suits and corporate wear — ordinary clothing is private, even if only worn to work
• Childcare costs — even if needed to enable you to work
• Glasses and dental work — health expenses are personal, not business
• Driver's licence renewal — even for tradies who need it for work
• Speeding fines and penalties — never deductible
• Personal mortgage interest — unless the home is genuinely the principal place of business (and beware CGT)
• Home phone connection fees — only the call portion related to business is deductible
• Cosmetic surgery — even if you're a public figure
• Tax debt interest (general interest charge from the ATO is technically deductible — but penalties are not)

Frequently Asked Questions#

Can a sole trader claim car expenses?#

Yes. You can use the cents-per-kilometre method (88c/km, capped at 5,000 km per year, no logbook required) or the logbook method (claim the business percentage of all running costs after a 12-week logbook).

Can I claim my mobile phone as a sole trader?#

Yes — but only the business portion. Keep a four-week diary of business vs personal calls and data, then apply that percentage to your annual bills.

Can I claim coffee or lunch with a client?#

No. The ATO treats food and drink with clients as private entertainment, not business expense.

Can I claim working from home?#

Yes. Use the fixed rate method (70c/hour with a record of hours) or the actual cost method (claim a proportion of actual bills based on floor area). You can't double-dip — pick one method per year.

Do I need to be registered for GST to claim deductions?#

No. GST registration and income tax deductions are separate. Even if you're below the $75,000 GST threshold, you still claim deductions on your individual tax return as a sole trader.

What records do I need to keep?#

Receipts, invoices, bank statements, logbooks, and any other written evidence of every expense — for five years from the date you lodge the return. Digital records are fine.

Can I claim deductions if I make a loss?#

Yes. As a sole trader, business losses can generally be offset against other income (wages, investment income) — provided you pass the non-commercial loss tests. If you don't pass the tests, the loss is carried forward to offset future business profits.

How do I claim the small business income tax offset?#

This is automatic when you lodge — you don't need to "claim" it as a deduction. The offset reduces your tax payable on net small business income by 16% (capped at $1,000 for FY2025–26).

Can I claim my Netflix or Spotify subscription?#

Almost never. Unless you can demonstrate it's genuinely required for your business (a music reviewer, a streaming media analyst), it's a private expense.

Record-Keeping for Sole Traders#

The ATO requires you to keep records for five years from the date of lodgement. Records must be:

• In English (or readily translatable)
• Showing how the expense was calculated and substantiated
• Retained as receipts, invoices, bank statements, logbooks, and diaries
• Stored in a way that they remain readable and unaltered

Cloud accounting software like OneBookPlus stores receipts as photos attached directly to expenses, then exports them at tax time. No more shoeboxes, no more lost paperwork.

Worked Example: A Sole Trader Tradie#

Bruno runs a solo plumbing business in Sydney as a sole trader. His 2025–26 figures:

• Gross income: $145,000
• Business expenses he's aware of: $42,000
• Starting taxable income: $103,000
• Income tax on $103,000 (2025–26 brackets): $4,288 (16% bracket) + $17,400 (30% bracket) = $21,688
• Plus Medicare levy 2% = $2,060
• Less Small Business Income Tax Offset (capped at $1,000) = –$1,000
• Tax he expects to pay: ~$22,748

After working through this guide, Bruno realises he hasn't claimed:

• 5,000 km of work travel @ 88c/km = $4,400
• Home office (works from home 8 hours/week × 48 weeks × 70c) = $269
• Mobile phone business portion (60% × $1,440 annual) = $864
• Toolbelt, multimeter, replacement saw blades = $1,350
• Industry magazine subscription = $220
• Tax agent fee from last year = $650
• Personal concessional super contribution = $15,000

Additional deductions: $22,753 New taxable income: $80,247 New tax: $4,288 + $10,574 (30% bracket) + $1,605 Medicare – $1,000 SBITO = ~$15,467 Cash tax saved: ~$7,281

The $15,000 super contribution sits in Bruno's retirement fund instead of the ATO. After 15% contributions tax inside super, $12,750 lands in his super balance. Combined improvement to his net financial position: roughly $20,000 from a single hour of careful expense review.

How OneBookPlus Helps Sole Traders Claim Everything#

OneBookPlus is built for Australian sole traders and small businesses. The platform automatically captures, categorises, and documents every deductible expense:

• Receipt capture via mobile — snap a photo, attach to an expense, never lose another receipt
• GST tracking on every invoice and expense
• Mileage logbook with GPS tracking
• Home office hours diary
• Asset register and depreciation schedule
• Pre-built deduction categories mapped to ATO codes
• Tax-ready P&L and expense reports for your accountant or self-lodgement

Our free tools also help you model the impact:

• Sole Trader Tax Calculator — combined income tax + Medicare for self-employed
• Income Tax Calculator — see your tax at different income levels
• GST Calculator — add or remove 10% GST
• Superannuation Calculator — model concessional contributions
• Capital Gains Tax Calculator — for asset sales
• HECS / HELP Calculator — if you're still paying down a study loan

Related Reading#

• ABN, Sole Trader & Business Structure in Australia
• How to Lodge a BAS in Australia: Complete 2026 Guide
• Australian GST Calculator: How to Add & Remove 10% GST
• Tax Invoice Requirements in Australia
• EOFY Checklist 2026: Complete End of Financial Year Guide
• Freelancer Invoicing Tips
• Superannuation Guide for Employers
• PAYG Withholding for Small Business

Don't Pay More Tax Than You Have To#

Most sole traders underclaim every year — not because they're trying to do the right thing, but because they don't know what's deductible and they don't have the records to back up what is.

Start your free OneBookPlus account and let the software capture, categorise, and document every deductible expense across the year. When tax time comes, you'll have a complete, ATO-ready picture of your business — every receipt, every kilometre, every super contribution accounted for.

Don't leave money with the ATO. Claim what's yours.