Most sole traders do not miss deductions because the rules are hard. They miss them because the receipts are in three places and the home office hours were never written down.
This is a one-page checklist of the common deductions for sole traders for 2025-26 returns (being lodged now) and the 2026-27 year, with the rate or rule for each. Every figure was checked against the ATO’s business deductions pages and related ATO guidance.
It suits sole traders and small partnerships who want a quick tick-list before tax time. For a detailed explanation of each category, read our full small business tax deductions guide.
Key takeaways
- Every claim must pass the ATO’s three golden rules: business use, business portion only, and records.
- Home-based business running costs: 70c per hour under the fixed rate method.
- Car: 88c per km for 2025-26 and 91c for 2026-27, up to 5,000 km.
- Assets under $20,000 can be written off if turnover is under $10 million.
- Personal super contributions can be deducted within the concessional cap of $30,000 (2025-26) or $32,500 (2026-27).
- Entertainment, traffic fines and private costs are not deductible.
Sole trader deductions checklist at a glance
| Expense | Deductible? | Key rule |
|---|---|---|
| Home office running costs | Yes | 70c per hour fixed rate, or actual costs with records |
| Rent or mortgage interest at home | Only with a place of business | Area must be set aside mainly for business |
| Car | Business portion | Cents per km (max 5,000 km) or logbook |
| Tools, laptop, equipment | Yes | Under $20,000 written off for eligible small business |
| Advertising, website, software subscriptions | Yes | Must relate to earning business income |
| Business insurance | Yes | Business portion of mixed policies |
| Tax agent and accounting fees | Yes | Claimed in the year you pay |
| Personal super contributions | Yes, with notice | Counts toward concessional cap |
| Client entertainment | No | Not deductible for income tax |
| Fines and private expenses | No | Never deductible |
Source: ATO business deductions, ATO home-based business expenses, ATO car expense rates, ATO contributions caps, checked 9 October 2026.
What can every sole trader claim?
The ATO’s three golden rules apply to every item: the expense must be for business, you claim only the business share of mixed costs, and you need records. Income you earn must also be counted; the ATO’s assessable income page lists what to include.
- Stock and materials you buy to sell or use in jobs
- Advertising, website hosting and software subscriptions
- Business insurance such as public liability and professional indemnity
- Phone and internet (business share)
- Bank fees and interest on business loans
- Accounting and tax agent fees
- Training that maintains or improves skills for your current business (self-education rules)
How do I claim home office costs?
There are two ways to claim running costs for a home-based business:
- Fixed rate: 70c for each hour you run the business from home. It covers energy, phone and internet, stationery and computer consumables. Keep a record of every hour for the full year.
- Actual cost: the real business share of each cost, backed by bills and a record of how you worked out the share.
Occupancy costs (rent, mortgage interest, rates, insurance) are only deductible if part of your home has the character of a place of business, such as a dedicated workshop. Claiming them can create a capital gains tax liability when you sell.
What car expenses can I claim?
For a car, sole traders can use the cents per kilometre method or the logbook method:
| Method | 2025-26 | 2026-27 | Records |
|---|---|---|---|
| Cents per km | 88c per km | 91c per km | Show how you worked out business km; max 5,000 km per car |
| Logbook | Business % of actual costs | Business % of actual costs | 12-week logbook plus receipts for all car costs |
Utes and vans designed to carry one tonne or more are not cars for this purpose; claim the business share of actual costs. Travel between home and a regular workplace is private unless you run a home-based business.
What about tools, equipment and assets?
If your aggregated turnover is under $10 million, assets costing less than $20,000 each can be written off in the year first used or installed ready for use. The ATO says this limit is permanent from 1 July 2026. See our instant asset write-off guide and the ATO’s write-off page.
Can I claim super, tax agent fees and insurance?
- Super: give your fund a notice of intent and get its acknowledgment before you lodge. See the ATO’s personal super contributions page and our contribution caps guide.
- Tax agent fees: deductible in the year you pay them as a cost of managing your tax affairs. ATO interest charges incurred from 1 July 2025 are not deductible.
- Insurance: business policies are deductible; for mixed policies, claim the business share.
Worked example: a home-based designer’s 2025-26 claims
Mia is a sole trader graphic designer with a taxable income of about $90,000 before these claims.
Home office: 1,200 hours x 70c = $840.
Car: 3,000 business km x 88c = $2,640.
Laptop costing $2,200, used 90% for business, written off: $2,200 x 90% = $1,980.
Tax agent fee paid during the year: $550.
Personal super contribution with a valid notice: $10,000.
Total deductions: $840 + $2,640 + $1,980 + $550 + $10,000 = $16,010.
At a 30% marginal rate plus 2% Medicare levy, the tax saving is about $16,010 x 32% = $5,123.20. Her fund pays 15% tax on the $10,000 contribution ($1,500), so the net saving is about $5,123.20 – $1,500 = $3,623.20.
Rule of thumb: Keep a separate business bank account and a simple log of home office hours and car trips from 1 July. Those two habits cover most of the records the ATO asks for.
What can’t sole traders claim?
- Entertainment, such as client lunches and drinks
- Traffic and parking fines
- Private and domestic costs, including normal clothing
- Expenses relating to non-assessable income
- The GST part of a cost if you can claim it as a GST credit
Employers giving staff benefits should also read about fringe benefits tax returns. If you are also an employee, see work-related tax deductions.
Common mistakes on sole trader deductions
- Using US rules: there is no 50% meal deduction or Section 179 in Australia.
- No home office log: the fixed rate needs a record of every hour.
- Claiming 100% of the phone: only the business share is deductible.
- Super without a notice: no acknowledgment from the fund, no deduction.
- Missing old claims: sole traders have 4 years to amend for 2024-25 onwards (ATO time limits).
Deductions are one part of good tax planning and tax minimisation. Pair them with cash flow forecasting so the tax bill is never a surprise. For more ideas, see our sole trader tax deductions guide.
FAQ about tax deductions for small business
What are the ATO’s rules for claiming a business expense?
The ATO sets three golden rules. The expense must be for your business, not private use. If it is partly private, you claim only the business portion. And you must have records to prove it. If you are registered for GST, you also cannot claim the GST part of an expense as a deduction when you can claim it as a GST credit.
Can I claim client lunches and coffees?
Generally no. Entertainment, including taking clients to lunch or drinks, is not deductible for income tax unless it is provided as an entertainment-related fringe benefit, which mainly applies to employers. There is no 50% rule for business meals in Australia; that is a US concept. Meals while travelling overnight for business are treated differently from entertainment.
How much can a sole trader claim for working from home?
Under the fixed rate method, a home-based business can claim 70 cents for each hour the business operates from home. It covers energy, phone and internet, stationery and computer consumables. You need a record of every hour worked at home for the whole year. Occupancy costs such as rent or mortgage interest need a dedicated place of business.
Can a sole trader claim super contributions?
Yes, personal contributions can be deductible if you give your fund a valid notice of intent and receive its acknowledgment before you claim. They count towards the concessional cap, which is $30,000 for 2025-26 and $32,500 for 2026-27. The fund generally pays 15% contributions tax, so the net saving depends on your marginal rate.
What if I forgot to claim a deduction last year?
You can amend your return. The ATO says sole traders have 4 years to amend assessments for the 2024-25 income year and later, starting the day after the assessment is sent. For 2023-24 and earlier, the limit is generally 2 years. Keep the records that support the extra claim, because the ATO may ask for them.
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This article is general information only and is not personal tax or legal advice. Figures and rules were checked against the ATO business deductions, home-based business, motor vehicle, instant asset write-off, personal super, contributions caps, cost of managing tax affairs and amendment pages on 9 October 2026. Rates and thresholds change, so confirm the current position before acting.
