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What are business expenses?
Business expenses are the ordinary and necessary costs associated with running a business. They can include many items, from office supplies and raw materials to employee salaries and rent for commercial space.
Any for-profit business can claim their business expenses and deduct them. This reduces the overall amount of a business’ taxable income.
What are the 4 types of business expenses?
Startup
Business startup costs are the expenses associated with creating a new business. These costs can vary depending on the type of business, but they may include:
market research
advertising
product development
permits and licences
purchasing equipment or raw materials.
Operating
Business operating costs are the expenses that a business incurs on a day-to-day basis. These include:
rent
utilities
salaries.
Capital
Capital costs are those expenses that are related to the acquisition or improvement of long-term assets, such as:
land
buildings
equipment.
Inventory
Inventory cost refers to the cost of acquiring and managing inventory. These expenses may include:
the cost of raw materials
transportation
storage.
Business expenses you can claim
Motor vehicle
If you use a motor vehicle for business purposes, you can claim your motor vehicle expenses as a business deduction. Deductible expenses might include:
fuel and oil
repairs
lease payments
registration
insurance cover premiums
loan interest.
You can claim costs from motor vehicles you provide to an employee or associate (as part of their employment package) as long as you operate your business as a company or trust.
What you can’t claim:
If you use your motor vehicle for business and personal purposes, you can only claim expenses related to the business use. You must be able to justify the percentage you are claiming. Keeping a log of whether each journey was business or personal, with dates, odometer readings and kilometres travelled is a practical method to stay compliant.
With claiming depreciation for cars, there are a few different methods you may use. If you use the cents-per-kilometre basis, you can't also claim a dedication under the simplified depreciation method.
You can't claim expenses for a vehicle that you don't own, lease or have under a hire-purchase agreement.
Repairs, maintenance and replacement
Repairs, maintenance and replacement costs are the costs of restoring the efficiency or function of an asset without changing its nature.
You can claim repairs, maintenance and replacement for property or items you don't own but are an integral part of your business.
What you can’t claim:
You can’t completely reconstruct your property or item to the point where it has a new purpose and still claim it as repair, maintenance or replacement.
Salaries/wages
You can claim a tax deduction for your employees' salaries or wages. To do this, you must comply with the pay-as-you-go (PAYG) withholding obligations and report each payment.
What you can’t claim:
Unless your business is structured as a company or trust, you can't pay yourself a salary or wage and also claim deductions for it.
Super contributions
You can claim tax deductions for super contributions you make for your employees and certain contractors. You can use the ATO’s Employee or contractor decision tool to better understand your obligations.
What you can’t claim:
You can’t claim super contributions you make for yourself but may be able to claim a deduction in your personal tax return for your personal super contributions.
Travel expenses
You can claim tax deductions for travel expenses if you or an employee travel for business purposes. If you are a sole trader or partner, you must keep a travel diary and record overnight business travel expenses.
Travel expenses you can claim are:
airfare, train tickets, taxis, car hires or fuel
accommodation
meals, for overnight trips.
What you can’t claim:
any portion of the trip that was a personal holiday
expenses for any family or friends who came along on the trip
souvenirs or gifts
entertainment.
Home-based business expenses
If you’re working out of your home or your home is the base of your business, you can claim home-based business expenses. This means you can claim expenses like:
home phone
internet
occupancy expenses like rent, mortgage and insurance, with some restrictions
utilities.
What you can’t claim:
Any expenses for the personal use of your home, such as landscaping.
Digital products
You can claim digital products and technology that you use for your business but should apportion your expenses between business and private use. Your digital products will fall under two types of expenses: operating and capital.
Operating expenses include:
the cost of your internet
any necessary software subscriptions
website maintenance costs or other costs associated with running your website
cloud storage.
Capital expenses include:
computers and accessories
mobile phones
tablets
POS systems
the cost of developing a website.
What you can’t claim:
The share of any digital product used in a personal capacity.
Depreciating assets
You can claim tax deductions for assets that have a limited life expectancy. These assets are reasonably expected to decline in value over time. You can claim assets that you personally own but use for your business, as well as those purchased by your business.
Examples of depreciating assets include:
mobile devices
machinery and equipment
furniture and other furnishings
computers and accessories
landlines
mobile phones.
What you can’t claim:
If you also use an asset in a personal capacity, you can’t claim for the total asset. For example, if you use a computer for half business use and half personal use, you can only claim a depreciation on half its cost.
Other operating expenses
There are many other operating expenses that you may claim. These might include:
debts
legal expenses
tender costs
bank fees
annual statutory fees (you can't claim penalties and fines resulting from breaches of Australian law)
union dues and subscription fees to associations that fall under trade, business or professional segments
interest on money borrowed (though restrictions apply)
clothing expenses if necessary for your industry
gifts and donations to organisations that have a deductible gift recipient status
expenses relating to education and technical or professional qualification
subscription costs for business or professional journals, information services, newspapers and magazines
any items that protect you or your employees from a health or injury risk in your work environment
protective gear such as sunscreen, sunglasses, hats if your business requires outdoor work.
If you are unsure whether you can claim an expense, consult an accountant or tax agent.
Commonly missed business deductions
Many business owners leave money on the table by overlooking legitimate tax deductions. Here are the expenses that accountants tell us they see missed most often:
Employee-related deductions
Staff training and development including online courses, workshops, and professional memberships for your team
Employee amenities like tea, coffee, and light meals provided on business premises
Protective clothing and uniforms with your business logo or branding
Home-based business deductions
Decline in value of home office furniture and equipment including desks, chairs, and filing cabinets used exclusively for business
Phone and internet proportioned to business use — many sole traders forget to claim their mobile phone costs
Electricity and heating/cooling for the portion of your home used for business
Financial and administrative deductions
Bank fees and merchant service charges including transaction fees, account- keeping fees, and EFTPOS charges
Domain name registration and website hosting fees
Cloud storage and backup services for business data
Vehicle and travel deductions
Car parking fees when travelling for business purposes
Tolls and road charges for business trips
Accommodation and meals when travelling overnight for business
Marketing and business development
Website maintenance and updates including plugins and security services
Email marketing platform subscriptions like Mailchimp or Drip
Business cards, flyers, and promotional materials
When can you claim business expenses?
The type of expense you are claiming will determine when you claim it. You can file operating expenses in the same year your business incurs them.
You can claim capital expenses over a longer period. General depreciation rules set the amounts that can be claimed, based on the asset's effective life. If your business is eligible, you may be able to use the simplified depreciation rules to claim an immediate deduction for the business-use portion of an asset’s cost.
If you have a prepaid expense (an expenditure you have paid for, which will take time exceeding 12 months to complete), you can deduct the expense within the eligible service period, not exceeding 10 years.
How to claim business expenses
1. Keep detailed records
Claiming business expenses correctly starts with good habits throughout the year, rather than a scrambled catch-up at tax time. The foundation is keeping detailed records of every business expense as it happens. Save all receipts, invoices, and bank statements so you can provide evidence of any expense you claim if you need to.
The right accounting software can make record-keeping easy. The MYOB Assist app lets you snap receipts on the go and capture every expense you’re entitled to deduct. Simply take a photo of your receipts when you’re on the go or upload images from your camera roll later.
2. Categorise your expenses properly
The next step is ensuring your expenses are properly categorised within your accounting software from the outset. MYOB’s cloud accounting software offers preset categories aligned with ATO requirements, with things like motor vehicle expenses, office supplies, marketing, and professional fees.
3. Always separate business and personal expenses
It's also crucial to separate business and personal expenses. If you use the same credit card or bank account for both, you'll need to clearly identify and exclude personal spending from your claims. Many business owners find it easier to maintain separate accounts entirely, eliminating any confusion about what's claimable.
4. Complete regular reconciliations
Finally, reconcile your accounts regularly — ideally monthly — to catch errors early and ensure nothing slips through the cracks. If you're unsure about whether something qualifies as a business expense or how to treat more complex situations like home office costs or motor vehicle claims, consult your accountant. Getting it right from the start is always easier than fixing mistakes later.
How to keep track of business expenses
A spreadsheet for business expenses
Knowing how to keep track of business expenses electronically will help you stay organised. The ATO accepts images of receipts or paper records saved digitally, so you could use an online spreadsheet for business expenses with an image of your receipt included.
Receipt scanner
Using receipt scanning accounting software can help you keep track of expenses while removing the need to store paper records.
Cashflow statement
A cashflow statement is a record of your incoming and outgoing cash flows. This statement will allow you to plan for the future by showing seasonal trends and showing when you need additional cash to cover your expenditure.
Business expense FAQs
What qualifies as a business expense?
A business expense must meet three key criteria to be tax deductible in Australia: it needs to be incurred in carrying on your business, it must have a direct connection to earning your assessable income, and it cannot be capital, private, or domestic in nature. Plus, you need to be able to prove that you incurred each expense.
If you're spending money to generate business income and it's not a personal expense or long-term asset purchase, it's likely a claimable business expense. When in doubt, check with your accountant.
Can I claim business expenses without receipts?
Generally, no. The ATO requires written evidence for all business expense claims, which typically means receipts, invoices, or bank statements. There are limited exceptions, though. For instance, you can claim up to $300 in work-related expenses without receipts (though you still need to show you spent the money, as well as how you calculated the amount). You can claim a deduction on work-related laundry expenses without receipts if you’re claiming $150 or less in this area, but you must keep a record of how you work out your claim.
Plus, you may be able to claim a deduction for small expenses ($10 or less) when you’re unable to get a receipt from a supplier, provided you keep a record and that the total claim for small expenses per income year is $200 or less.
How long do I need to keep records for business expenses?
You must keep business records for five years from the date you lodge your tax return. This applies to receipts, invoices, bank statements, and any other documents that support the claims in your tax return.
Digital records are fine, and in fact, they're often more reliable than paper records that can fade or get lost.
How far back can I claim expenses?
You can only claim business expenses in the financial year they were incurred, and as a sole trader or small or medium business owner, you generally have two years from the lodgement due date to amend a tax return if you've missed claiming an expense. (Although, for the 2024-2025 income year and beyond, there will now be four years to lodge amendments.)
Still, it's better to claim expenses correctly the first time rather than relying on amendments. If you've missed claiming expenses from previous years and it's within the amendment window, speak with your accountant about lodging an amendment ASAP.
Manage your expenses better with MYOB
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If you want to take your business to the next level, MYOB can get you there.
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Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.