If you’re running a small business or working as a sole trader in Australia, you’ve probably wondered how to get a good tax return without crossing the line. Good news: you don’t need fancy accounting tricks. Just a clear grasp of how your income and expenses affect your final return, and an eye for legitimate deductions that’ll save you real money.
The ATO looks closely at the details you report, and so do banks, especially when you’re applying for a business loan or home finance. Your tax return isn’t just about what you owe (or don’t). It paints a picture of your financial health, and the clearer that picture is, the more options you’ll have when it’s time to borrow or make big money decisions.
So, what kind of expenses can legitimately reduce your taxable income? And how can you make sure you’re not leaving any money on the table or triggering an audit? Let’s break it all down in a doable way, even if tax time usually makes your head spin.
What are tax deductions, and how do they reduce your taxable income?
Tax deductions lower your taxable income, which means you pay less tax. Pretty straightforward, right?
If you earn $85,000 a year and claim $5,000 in work-related expenses, you’re only taxed on $80,000. That can make a real difference come tax time.
What deductions can you claim?
Whether you’re a sole trader, running a small business, or working from home, there are deductions you may be able to claim. According to the ATO, here are some of the most common ones people often forget or miss:
- Vehicle and travel expenses: If you use your car for work (excluding travel to/from your regular workplace), you can claim fuel, repairs, and depreciation.
- Work-related clothing and laundry: Uniforms with logos, protective gear, and related laundry costs count.
- Internet and mobile: You can claim a portion of the bill if you use your phone or internet for business or work.
- Tools and equipment: If you’ve bought gear you need to do your job or run the business, from laptops to trade tools, that’s a tick for deductions.
- Training and education: Courses and certifications directly related to your current job are deductible, not ones for a career change.
Visit our post about tax deductions for a complete overview.
Claiming business and self-employment expenses
If you’re self-employed or running a small business, you’re likely spending money on things that keep your business running. The good news? Many of those costs can be claimed as deductions during tax time. Claiming your business and self-employment expenses accurately is one of the easiest ways to get more tax back.
What expenses can I claim as a business or self-employed taxpayer?
You can claim deductions for most expenses directly connected to earning your income. The ATO is clear on this. You can usually claim it if it’s a legitimate part of running your business.
Here are some typical business costs you should be tracking:
- Office supplies: Think printer paper, pens, notebooks, postage, and other the everyday items
- Technology & equipment: Laptops, monitors, mobile phones, software, and even tools specific to your trade
- Marketing: Website hosting, digital ads, printed flyers, and any promotional spend
- Business insurance: Public liability, professional indemnity, and other necessary policies
- Accounting and legal fees: That tax return help is deductible
- Training courses: As long as they are directly related to your business
Just make sure the expenses are genuinely for business use. Claiming a Netflix subscription probably won’t work unless you’re reviewing shows as part of your job.
Learn more from business.gov.au.
Can I claim for using my car or working from home?
Yes, and this is where people often miss deductions. If you’re using your car for business or a part of your home as an office, you can make claims for that use, too.
For motor vehicles, you’ve got two main claiming options:
- Cents per kilometre method: Can claim up to 5,000 km annually at a set rate (as of FY23-24, 85 cents/km)
- Logbook method: Track your trips for 12 weeks to work out the percentage used for business
If you work from home, you can claim costs like electricity, internet, depreciation of furniture and equipment, and phone use. The fixed rate method lets you claim 67 cents per work hour (updated in July 2022), but only if your records are good. Learn more about car expenses here.
Handle super contributions efficiently
Paying more into your superannuation can do more than just prepare you for retirement. It can directly reduce your tax bill if you do it correctly.
How do super contributions reduce your tax?
There are two main types of super contributions that the ATO considers for tax purposes:
- Concessional (pre-tax) contributions include employer super guarantee, salary sacrifice, and personal contributions you claim as a deduction. They’re usually taxed at 15%, often lower than your income tax rate.
- Non-concessional (after-tax) contributions are from your take-home pay or personal savings. Since the money has already been taxed, these aren’t taxed when they go into your super.
For 2025, the concessional contributions cap is $30,000 (up from $27,500 in 2024). That’s even more room to reduce your taxable income. The non-concessional cap is $120,000, or up to $360,000 under the bring-forward rule if you’re under 75.
Why should business owners look at salary sacrifice?
If you’re a business owner who pays yourself a wage, setting up a salary sacrifice arrangement could be a simple way to save more in tax. Here’s how it works:
- You agree to have part of your gross salary paid directly into your super fund before tax is removed.
- That amount is taxed at 15% instead of your regular income tax rate, potentially saving you if your marginal rate is 32.5% or higher.
- Over time, those savings compound in your super, growing tax-effectively.
Let’s say you’re earning $100,000 from your ecommerce business. You could sacrifice $15,000 in salary for super this year. That $15,000 gets taxed at 15%, not your usual marginal rate of 32.5% or higher. That’s over $2,600 saved in tax, plus more in long-term compounding returns.
Smarter healthcare choices
You can still use health expenses to your advantage during tax time in a few clever ways. If you’re earning above certain thresholds and don’t have private hospital cover, you could be paying more tax than you need to.
How does private health insurance affect your tax return?
Let’s talk about the private health insurance rebate and the Medicare Levy Surcharge (MLS). These two are often misunderstood but can make a real difference in your return or stop you from losing money you didn’t need to lose.
- Private health insurance rebate: If you earn under $144,000 as a single or $288,000 as a family (2024–25 thresholds), the government kicks in a percentage of your insurance costs. This rebate can be claimed as a premium reduction through your insurer, or you can claim it as a refundable tax offset in your tax return.
- Medicare Levy Surcharge: If you earn above $97,000 for singles or $194,000 for families and don’t have a compliant hospital cover, you’ll get hit with the MLS up to 1.5% of your income. Having the right private hospital cover helps you avoid this charge, which means less tax liability overall.
So, if you earn over the threshold and don’t have private hospital insurance, you’re basically paying extra tax with no benefits to show for it.
Can you still claim medical expenses on your tax return?
The short answer? For most people, no. But there are exceptions worth knowing about.
While the general medical expenses tax offset ended in 2019, it’s still available for out-of-pocket expenses relating to disability aids, attendant care, or aged care. If that applies to you or someone in your care, the offset can give you a bit of relief.
Find out more from privatehealth.gov.au.
Claim education-related expenses
Upskilling can boost more than just your career. If you’re working and studying at the same time, you can claim self-education expenses to reduce your tax bill.
What education expenses can you claim?
The ATO allows you to claim self-education expenses when your study is directly connected to your current income-earning role. That means the course must maintain or improve the skills you need in your job, or it might increase income from your current role.
- Course fees (provided you’re not receiving assistance like HECS-HELP)
- Books, stationery, and online resources used for the course
- Internet and phone usage (but only the percentage related to your study)
- Depreciation on your laptop or office equipment used for study
- Travel expenses to and from in-person classes
For example, let’s say you’re an accountant taking a short course in cloud accounting software to brush up your digital skills. That’s directly linked to your current role. You could claim any textbooks, your internet used during study hours, and even a portion of your laptop’s depreciation.
Learn more about self-education expenses here.
What can’t you claim when it comes to education?
Not every online course or late-night crash lesson is tax-deductible. There are a few straightforward rules around what doesn’t count:
- You can’t claim if the study is only connected to getting a new job in a different field
- You can’t claim if your employer has reimbursed you, or if you’re using a loan like HECS
- You can’t include groceries, childcare, or your full internet bill, only the work-related portion
Here’s a real-world example. If you’re working full-time as a nurse and decide to do a part-time coding bootcamp because you want to shift into tech, no deductions there. That study is aimed at a career change, not your current job.
Don’t overlook charitable donations
If you’ve given more than $2 to a registered charity, you could trim your taxable income without realising it. Donations aren’t just good for the community. They can also make a real difference to your tax bill.
What kind of donations are tax-deductible?
To claim a deduction, the donation must be:
- More than $2 in value
- Made to a Deductible Gift Recipient (DGR), a charity or organisation registered with the ATO for tax-deductible status
- A true gift with no strings attached, no valuable perks or rewards given in return
For example, donating $50 to Lifeline or The Smith Family is claimable. But buying a $50 raffle ticket or auction item at a charity event? Not usually. If you’re receiving something of material value, the ATO sees it as a purchase, not a donation.
What’s the difference between a gift and a donation?
A gift is given freely, with no expectation of anything in return. A donation might come with entry to an event, a dinner, or a novelty prize – if that’s the case, the deduction might be off the table or only partially claimable.
You can check the charity’s DGR status via the ABN lookup website if unsure. Or even better, work with an accountant who can help you make the right calls and keep your claims clean.
Your next steps to get a bigger tax return
EOFY’s creeping closer, so if you’re serious about getting more back this tax time, now’s the moment to take action. Whether you’re a sole trader juggling receipts or a small business owner with a growing team, preparing before 30 June can make or break your refund.
Start early. Ask questions. Get more back.
The earlier you start ticking off your tax list, the smoother the process. Reach out to your bookkeeper or tax agent now. Or, better yet, use tools that make the process smoother for both of you.
