Sole Trader Tax Deductions: What You Can Claim

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What makes sole trader tax different

As a sole trader, you and your business are the same legal entity — your business income is your personal income, reported in your individual tax return. Unlike an employee, no one automatically withholds tax from what you earn, so you're responsible for setting money aside and, in most cases, making PAYG instalments throughout the year.

Common deductible expenses

• Home office costs — if you work from home, the fixed rate method applies the same way it does for employees.
• Vehicle and travel expenses — work-related trips, using either the cents-per-kilometre method or a logbook for actual costs.
• Tools and equipment — items used to earn your income, from trade tools to a laptop.
• Phone and internet — the business-use portion of your bills.
• Insurance — professional indemnity, public liability, and other business-related policies.
• Professional fees — accounting, bookkeeping, and registered agent fees.

Instant asset write-off

If your business has an aggregated turnover under $10 million, the instant asset write-off lets you immediately deduct the full cost of eligible assets under $20,000 (for the 2025-26 financial year), rather than depreciating them over several years. This applies per asset, so you can write off several eligible purchases in the same year.

The 2026-27 Federal Budget proposed making the $20,000 threshold a permanent feature going forward — check the ATO's website for the confirmed current-year threshold before making a purchase decision based on this.

PAYG instalments

Once your business income reaches a certain level, the ATO will generally ask you to prepay tax in quarterly instalments throughout the year, rather than paying it all at tax time. This is designed to smooth out your cash flow rather than leaving you with one large bill.

GST registration

You must register for GST once your business turnover reaches $75,000 in a financial year — below that, registration is optional. Once registered, you charge GST on your invoices and can claim GST credits on business purchases.

Superannuation for sole traders

Unlike employees, sole traders don't receive compulsory super guarantee contributions from anyone — it's entirely up to you to contribute to your own super. Personal super contributions can generally be claimed as a tax deduction, which is worth factoring into your planning.

Record-keeping basics

• Keep business and personal expenses in separate accounts wherever possible — it makes tax time significantly simpler.
• Keep receipts and invoices for every claimed expense, and a logbook if claiming vehicle expenses on that basis.
• Only claim the business-use portion of mixed-use items (like a phone used for both work and personal calls).

Common mistakes to avoid

• Claiming 100% of an expense that has genuine private use as well.
• Not setting aside money for tax throughout the year, then being caught short at tax time.
• Forgetting to register for GST once turnover crosses $75,000.

Related guides

General information only. Consult a tax professional for your specific situation.