6 Most Common Sole Trader Deductions You Can Claim In Australia

sole trader deductions
Sole Trader Deductions

Do you own a sole trader business in Australia? If yes, you should be well aware of what you can claim at the time of tax return lodgement. In general, you can claim most of the expenses as tax deductions incurred in running the sole trader business. Still, several sole traders fail to claim the deductions, primarily because of their lack of knowledge. But what exactly can be termed as sole trader deductions to claim in 2021? That is what we have discussed here to get some helpful tips on the best way to get as many claims as possible in your account. If you go to any tax consultants in Perth, they will also give you these tips.

Running Expenses

As per the rules set by the Australian Taxation Office, if any of these following running costs are incurred, you can claim them in the yearly personal tax return.

  • General home office expenses: Include costs for printer ink, stationery, and paper.

  • Home office equipment: Include costs for printers, computers, phones, and furniture.

  • Utilities: Include costs for air conditioning, internet, gas, electricity, and telephone connections.

  • Cleaning expenses

  • Repair costs: Includes repair costs for furniture and other fittings.


As a business progresses, the business assets become older, their yearly values decrease, and it gives rise to depreciation. If you use your business assets to make your income, you can claim depreciation as one of the sole trader deductions for tax. It is allowed under ATO rules and conditions.

Depreciation can be claimed on different business assets, which are as follows.

  • Desktop computers or laptops,

  • Photocopiers and printers,

  • Floorings and carpets,

  • Curtains,

  • Motor vehicles, and

  • Office furnishings

To claim depreciation as a sole trader owner, you have to follow the same steps any other small business needs. The ATO’s depreciation rules for small businesses are much more simplified to simplify the tax deduction claiming procedure. You can check the official website for more detailed and specific information.

Occupancy Expenses

Do you work from home? Occupancy expenses can be claimed related to the area of your home that you have occupied to carry out the business works. Occupancy expenses include property insurance, rent, mortgage interest, council rates, and land taxes.

If you want to claim a share of the occupancy costs for the home-based business, you will need to pass the interest deductibility test. This test determines whether the selected space in the home is suitable to run a business or not. The indicators proposed by the ATO to determine the suitability of the place for a business include the following.

  • The selected area is entirely or at least almost entirely utilized for business purposes.

  • You have marked the place clearly as a place to do business. You can use a specific sign to help the authority understand.

  • One cannot easily convert the area into a space for domestic or private purposes like a spare guest room.

  • The clients frequently visit the area.

If you want to calculate the home portion you use for business purposes, you must follow a straightforward equation. The floor area used for doing business needs to be multiplied by the total occupancy costs.

Let us give an example for a better understanding. Suppose you operate your hairdressing salon from your home. You have converted your garage to your work area, and you do all the business work from there. As you use the salon for carrying out the hairdressing business, you will easily pass the interest deductibility test and be eligible to claim occupancy expenses. Now, if your salon area covers about 20% of your home floor area, you can claim tax deductions for 20% of the costs for your council rates, insurance premiums, and mortgage interests.

Prepaid expenses

Prepaid expenses are mostly overlooked in the case of a sole trader. So, if you have made some advance payments for your business this year, you will not need to pay them next year, and most importantly, you can claim those payments in your tax return in the ongoing year. Examples of prepaid expenses include service contracts, rent, travel expenses, conference bookings, training, and subscriptions for professional applications.

Contributions To A Superannuation Fund

According to the Australian Taxation Office laws, you will be able to claim a maximum of $25000 from your contributions to superannuation funds.

Bad Debts

Are you finding it difficult to retrieve debts from any of your clients? Well, you should not worry about it much. As per tax laws, you can write off these debts and claim them as a tax deduction. But, for a successful claim, you must have sufficient documents to support the following.

  • You have directly communicated with the person who owes the money.

  • You have sent frequent reminder notices to that person.

  • You have followed proper steps to find the financial position of the debtor.

  • And you have taken action to recover your debts.

Even after following all the possible steps, if you cannot recover your debts and can prove them, bad debts can be claimed as a tax deduction.

Read More: What is budgeting?

Some Important Points To Remember

You can save a substantial amount of money from your sole trader deductions, but you should know the proper claiming rules. Here we list those rules.

  • First of all, 100% of all expenses cannot be claimed. And if you utilize something for business purposes and the rest for your personal causes, you can only claim the business part.

  • If you want to claim car costs, you have to maintain a logbook, and so you have to make sure your business car has regular logbook servicing. For a sole trader, you can claim for costs that cover a maximum of 5000 km.

  • Travel expenses can be claimed, but if there are family members and friends, you can only claim those costs related to the sole trader.


Maintaining receipts and different financial records is vital when it comes to claiming a tax deduction. This is the reason why you should always think of having a sole trader accountant in your office who can keep all the records safe and arrange them.