You can claim most expenses you incur in running your business as deductions to reduce your assessable income. The rules can vary depending on the business structure you operate under and the nature of each expense.

Keeping good records

You must keep records of your business transactions, including expense claims, for five years after they are prepared, obtained or the transactions completed, whichever occurs later. If you don’t have those records, your expense claim may be denied or reduced. Store records in either paper or electronic form. But they must be readily accessible and available in English.

What you can claim and how to claim

You can claim most expenses you incur in running your business as deductions to reduce your assessable income. As a general rule, you can claim your day-to-day business operating expenses in full in the year you incur them, while capital items – such as buying plant and equipment – are claimed over a number of years.

Motor vehicle expenses

The deductions you can claim for the business use of a motor vehicle depend on the business structure you operate under, whether you use the vehicle for private use, and the type of vehicle. We have also developed an online calculator to help you work out your entitlement to a deduction.

Business travel expenses

To claim business travel expenses, you need specific, documented evidence of the expenses.

Capital allowances – plant and equipment depreciation

There are two sets of rules you can use to work out how much you can claim for depreciating assets, such as plant and equipment – the simpler capital allowances rules concession; and the uniform capital allowances rules. Small businesses with aggregated turnover of less than $2 million can select the set of rules preferred. Larger businesses must use the uniform capital allowance rules.

Salaries, wages and super

If you operate your business as a company or trust, you can claim a deduction for salary and wages paid to employees, and for super contributions you make to a complying super fund or retirement savings account for them. If you are self-employed, you can claim a deduction for your own super contributions in your personal tax return and you can claim a deduction for salary and wages you pay to other employees.

Losses

If you operate a business that makes a loss, you can carry forward that loss and may be able to claim a deduction for that loss in a future year. The rules differ for different business structures. If you operate as a sole trader or a partner in a partnership, you may be able to claim business losses by offsetting them against other income – for example, income you earn from salary or wages.

Expenses related to your home work area

If you run all or some of your business from home, you may be able to claim things such as rent, rates, insurance and utilities. What you can claim depends on whether your home is your place of business and whether or not you have an area set aside exclusively for business activities.

Tax-related expenses

You may be eligible to claim a deduction for things such as having a bookkeeper prepare your business records and activity statements.

Repairs, maintenance and replacement expenses

You may be able to claim a deduction for repairs to machinery, tools or premises you use to produce business income.