Every business expense you track and substantiate is a potential tax deduction, and every one you miss is money left on the table. This guide covers what counts, the records the ATO expects, the all-important vehicle logbook method, home-office costs, and building a system you will actually use.
Every business expense you track and substantiate is a potential tax deduction, and every one you miss is money left on the table. Tracking expenses is not bureaucracy for its own sake — it directly reduces your taxable income, provided you have the records to back each claim. The discipline of capturing expenses as they happen is one of the highest-return habits in small business.
A simple budget calculator helps you see where the money goes once it is tracked.
Broadly, you can claim expenses directly related to earning your business income. Common categories include materials and stock, tools and equipment, business-use phone and internet, software subscriptions, professional fees, marketing, business travel, and a portion of home-office costs if you work from home. The unifying test is that the expense must genuinely relate to producing your assessable income.
A deduction is only as good as its evidence. For most expenses you need a receipt or tax invoice showing the supplier, date, amount and what was bought. Keep them digitally or on paper, and hold them for five years. The practical rule of thumb: if you could not prove an expense to the ATO, do not claim it. Capturing receipts as you go — photographing them immediately — beats hunting for them at tax time.
Vehicle use is one of the most valuable and most scrutinised deductions, and it hinges on records. If you use the logbook method, you record every business and private trip over a representative period to establish your business-use percentage, which then applies to your running costs.
A valid logbook generally records the date, odometer readings, kilometres travelled, and the purpose of each trip. Our ATO logbook tool is built for exactly this, and there is more detail in our vehicle-related guidance.
If you run your business from home, a share of running costs — electricity, heating, internet, phone — can be deductible, calculated using an accepted method such as a fixed hourly rate or actual apportioned costs. The rules and rates change, so check the current ATO guidance, and keep a record of the hours worked and the basis of your calculation.
The best expense-tracking system is the one you will actually use. That might be accounting software, a spreadsheet, or a dedicated business card whose statement captures most spending automatically. Whatever you choose, the principles are the same: capture every expense promptly, keep the receipt, separate business from private, and note the business-use share where relevant. Our free downloadable resources can help you get organised, and a registered tax agent will make sure you are claiming everything you are entitled to.
What business expenses can I claim?
Expenses directly related to earning your business income — materials, tools, business-use phone and internet, software, professional fees, marketing, business travel, and a portion of home-office costs. Private-use portions must be excluded.
What records does the ATO expect for expenses?
A receipt or tax invoice showing the supplier, date, amount and what was bought, kept for five years. The practical rule: if you could not prove an expense to the ATO, do not claim it. Capturing receipts as you go beats hunting for them at tax time.
How does the vehicle logbook method work?
You record every business and private trip over a representative period to establish your business-use percentage, which then applies to your running costs. A valid logbook records the date, odometer readings, kilometres and purpose of each trip.
Do I need a logbook to claim vehicle expenses?
Without a valid logbook you are generally limited to a capped, lower-rate method. For anyone with significant business driving, a proper logbook usually produces a substantially larger, fully substantiated deduction.
Can I claim home-office expenses?
If you run your business from home, a share of running costs like electricity, heating and internet can be deductible, calculated using an accepted method such as a fixed hourly rate or actual apportioned costs. Keep a record of hours worked and your basis of calculation.