Tax-deductible expenses for sole traders to watch for

Are you a sole trader? Here are some tips on deductible expenses to watch for.

If you haven’t spoken to us or your bookkeeper about EOFY matters yet, it might be a good idea to give us a call.

After all, you’ve done the thinking and the work, and are probably desperate to keep a little more of that hard-earned profit. However, being self-employed, you must first understand the nature of your expenses.

What deductions can I claim as a sole trader?

You can claim expenses that are directly related to earning your taxable income. Private and personal expenses, such as after-school care or home loan interest payments, cannot be claimed.

The expenses you can claim — and when you claim them — depends on the type of asset purchased or service engaged. Operating expenses for a sole trader can usually be claimed in the year they occur, while capital expenses must be claimed over time.

Business vs personal expenses

Expenses that are usually not deductible

  • Entertainment expenses
  • Traffic fines
  • Private or domestic expenses, such as childcare fees or clothes for your family
  • Expenses relating to earning income that is not assessable, such as money you earn from a hobby
  • The GST component of a purchase if you can claim it as a GST credit on your business activity statement

Expenses that may be deductible

  • Wages
  • Office stationery
  • Computer or laptop that is used for business
  • Machinery and equipment
  • Motor vehicle expenses
  • Advertising
  • Business travel
  • Bills, like insurance and phone

How can a sole trader pay less tax?

1. Claim operating expenses when you incur them

Operating expenses are also called revenue expenses because they help generate income, and they can be claimed in the financial year you incur them. Examples of claims that can be made in the year they are incurred include:

  • Salaries, wages, overtime payments, allowances and bonuses
  • Advertising and promotional expenses
  • Electricity, phones, gas and stationery
  • Business travel costs
  • Asset maintenance and repair costs
  • Parking fees (but not fines)

2. Prepay some expenses this year to reduce taxes

Pay in advance and bring the deduction forward to this year. If you have a healthy cashflow, you can prepay your:

  • Business loans (prepay on fixed rates 12 months in advance)
  • Office and equipment lease payments
  • Business insurance
  • Business related subscriptions
  • Business travel, seminars and conference bookings
  • Telephone and IT services

Tip: Two birds with one stone — See if you can combine the benefit of bringing forward the tax deduction and getting a discount for paying your supplier in advance.

For every small business looking for a tax deduction, there will most likely be a service provider or salesperson looking to boost their sales results before June 30.

3. Consider capital expenses (asset purchases)

It’s important to mention that a small business that purchases an asset costing less than $6500 can still claim 100 percent of the cost in the actual year the expense is incurred.

Even if you have not paid for the item yet, sole traders can still claim as long as you are invoiced before 30 June.

Larger capital acquisitions that have an expected life longer than one year, such as IT servers, vehicles and expensive plant and equipment, must be claimed over a number of years.

These items are claimed via accelerated depreciation of the capital value, with 15 percent claimed in the first year (even if purchased in the last month of the year) and 30 percent each year thereafter.

Examples of capital expense assets that must be depreciated over time include:

  • Motor vehicles
  • Computers, servers, printers and copiers
  • Office and warehouse fixtures and fittings
  • Plant and equipment

4. Claim the instant asset write-off

Sole traders are eligible to claim the instant asset writeoff, which allows small businesses to claim immediate deductions for new or second-hand plant and equipment asset purchases like cars, office equipment and tools.

Before making any big purchases, check the instant asset write-off eligibility criteria and threshold, because these can change. Check your business’s eligibility and apply the correct threshold amount depending on when the asset was purchased, first used or installed ready for use.

Check the ATO website for the latest information on thresholds.

5. Bite the bullet and write off any bad debts

A bad debt is a taxable sale you made that has been unpaid for 12 months or more, with no chance of it being recovered.

You must keep written notes that the debt has been written off and why. Discuss this with your accountant, as there may be GST consequences.

6. Use concessional contributions to superannuation

Make sure to use your own superannuation allowance of up to $25,000 for those under 60, and $35,000 for those over 60.

Remember that if your spouse works in the business even part-time then you can still contribute up to their limit, but make sure to allow for any employer contributions from other jobs.

7. Do a stocktake

It might be time to call in the kids, parents and friends to help you identify damaged and/or obsolete stock items that can be written down in value or written off completely.

This reduces the value of your trading stock and, as a result, lowers your taxable business profit.

8. Be sensible

As a sole trader, your focus should be on managing your tax and not looking at measures that will put your business under cash flow pressures in the coming years, just to achieve a short-term tax advantage.

Buying unnecessary assets, upgrading cars or paying higher super contributions are pointless if it means your business will face cash flow issues.

As you enter a new financial year, consider speaking to us about whether you should be moving to a corporate structure going forward.

There’s an app for that

You’re not just a sole trader or freelancer, you’re the finance department, marketing head, coffee runner and admin ninja. If finance isn’t your forte, hand over the reins and let tech play CFO.

The app Solo by MYOB can help you automate GST, track expenses​ and prep your business for tax time. You can even download reports from Solo to share with us or your bookkeeper. Translation: less stress, more doing the work you love.

Source: MYOB
Reproduced with the permission of MYOB. This article by MYOB Subject Matter Experts was originally published at https://www.myob.com/au/resources/post/taxdeductible-expenses-for-sole-traders-to-watch-for
Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.
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Investing for the next generation

For many, the goal of investing is about creating wealth for a comfortable financial future, as well as a legacy that supports your children and grandchildren for decades to come.

But one of the greatest risks to that legacy can be the challenge of dealing with sudden wealth. When adult children inherit large sums or significant assets without preparation, sometimes the result is family tension, poor decisions or erosion of wealth.

While precise figures vary, research and industry experience consistently show that many families struggle to preserve wealth beyond the second and third generations, largely due to behavioural and governance challenges rather than investment performance.

Building financial literacy

Financial capability is developed over years of exposure, education, and experience.

The Australian Securities and Investments Commission (ASIC) MoneySmart program emphasises that financial literacy is a core life skill, not simply a technical ability.

While an inheritance may be some years off, parents who are expecting to pass on some form of an inheritance, should begin involving their children in financial discussions where appropriate. This might include reviewing investment portfolios together, explaining the complexities of how superannuation works or discussing the rationale behind major financial decisions. Understanding how risk is associated with investing, and ongoing tax obligations is also essential to create the whole picture.

Practical experience is just as important as theory. Allowing adult children to manage a portion of investments, under guidance, can build confidence and accountability. This phased approach reduces the risk of overwhelm later, when financial responsibility increases significantly.

Gifting or loaning?

Another important consideration when supporting the next generation is whether to provide financial assistance as a gift or a loan. The decision has both ethical and practical implications.

Gifting can provide immediate support without the burden of repayment, allowing children to purchase a home, invest or establish a business. But unequal gifting among siblings may create perceptions of favouritism, even if the intention is fair. Clear communication and documentation of the reasoning behind decisions is essential.

Loaning, on the other hand, can maintain a sense of responsibility and fairness.

Loans structured with clear terms can encourage financial discipline and avoid creating dependency. Families often formalise the arrangements with written agreements that set expectations for repayments and interest. There are also taxation and legal considerations.

The Australian Taxation Office may assess certain arrangements differently depending on whether funds are genuinely gifted or loaned. Professional advice ensures that intentions are reflected correctly. Ultimately, the choice between gifting and loaning may come down to the financial maturity of the recipient and your estate plan.

Preparing the next generation beyond money

Financial preparation alone is not enough. Inheriting wealth also involves emotional and behavioural readiness.

Open conversations about wealth, values and expectations are important. This includes explaining the purpose of wealth, whether it is to provide security, support philanthropy or create opportunities for future generations.

Governance structures, such as family meetings, investment committees or advisory boards can also help heirs understand their roles and responsibilities and encourage collaboration.

Philanthropy is another powerful tool for preparing heirs. Involving children in charitable giving decisions can instil a sense of social responsibility. It reinforces the idea that wealth is not solely for personal use, but also a resource to benefit the broader community.

Managing the transition

Gradual transition strategies can ease the adjustment for both parents and children.

This might involve progressively transferring control of assets. For example, adult children may first participate in decision-making, then take on increasing responsibility for managing investments over time. Trust structures are often used for staged distributions, allowing flexibility and protection.

Regular reviews are equally important. As family circumstances change, so too should the plan. Marriage, divorce, business ventures or health issues can all affect how wealth should be managed and transferred.

A legacy of capability

Successful intergenerational wealth transfer is not measured by the size of the inheritance but by the preparedness of those who receive it. Financial literacy, decision-making and open communication are the foundations of lasting wealth. By investing time in educating and including the next generation, families can reduce the risks associated with sudden wealth and create a legacy that endures.

If you’d like to discuss how to prepare your family for a successful wealth transition, we’re here to help.

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Smart tax and super planning before EOFY

Tax time is just around the corner, so now is the time to make sure you’re prepared for 30 June.

Each year, the ATO highlights its areas of focus. Taking a few minutes now to review these can help you avoid issues when lodging your return.

Work-related deductions under scrutiny

This year, the ATO is focusing on work-related deductions and income that’s not declared on tax returns.

If you are claiming work-related expenses, ensure they meet the ATO’s three golden rules:i

  1. The expense must be directly related to earning your income
  2. You must not have been reimbursed
  3. You must have records to support your claim, such as receipts or a logbook

For working from home expenses, you can use either the actual cost method or the fixed rate method.

Instant asset write-off

The instant asset write-off remains an important tax concession for Australian small businesses in the 2025–2026 financial year. Eligible businesses with an aggregated turnover of less than $10 million can immediately deduct the business portion of eligible assets costing less than $20,000, instead of depreciating them over several years. The asset must be first used or installed ready for use between 1 July 2025 and 30 June 2026.ii

Don’t overlook income

The ATO is also paying close attention to undeclared income. This includes:iii

  • Cash payments
  • Interest income
  • Rental income
  • Earnings from crypto assets

For those with a side hustle, check whether it may be considered a business. All business income, regardless of amount, is assessable and must be declared.iv

If you intend to claim deductions for business expenses related to your side hustle, ensure they are directly connected to earning that income and are supported by receipts.

Time for a portfolio review

Recent market volatility makes this a good time to review your investment strategy.

Checking your capital gains or losses before 30 June allows you to take action where appropriate.

For example, you may consider realising capital losses to offset gains from assets such as shares, property or crypto.

Tax timing strategies

If you have regular deductible expenses, such as investment loan interest or annual costs, it may be useful for some to prepaying them before 30 June to claim a deduction for this financial year.

You may also consider the timing of income expected before 30 June. Deferring income until after the end of the financial year may help reduce your tax liability.

Tax rates are also changing for lower income earners. From 1 July 2026, the rate for income between $18,201 and $45,000 will reduce from 16 per cent to 15 per cent, with a further reduction to 14 per cent the following year.

Super contribution strategies

The end of the financial year is an ideal time to review your super contributions.

If you plan to contribute before 30 June, check when your employer will make their contributions. The introduction of Payday Super means some employers are contributing earlier, which may affect your contribution caps.

For SMSF members, make sure that:

  • All contributions are received by the fund’s bank account by 30 June
  • Minimum pension payments are made
  • Asset valuations are up to date
  • Fund records are current

Be alert for tax time misinformation

The ATO is warning taxpayers to be cautious about the growing wave of tax “tips”, shortcuts and refund claims circulating online.

Content from social media, “finfluencers” and even artificial intelligence tools can sound convincing, but it is not always accurate or relevant to Australian tax law. Acting on this kind of advice can lead to incorrect claims, delays in processing returns and, in some cases, penalties.

Larger refunds, easy deductions or so-called “loopholes” should always be checked against trusted sources.

Ultimately, you are responsible for the accuracy of everything included in your tax return, regardless of where the advice came from.

Taking a few extra minutes to verify information before you lodge can help you avoid costly mistakes and keep your return on the right side of the rules.

Please get in touch if you need any help preparing for the end of the financial year.

Source: https://www.ato.gov.au

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Retirement income options when markets are volatile

The income assumptions many have carried into retirement are being tested in the current economic climate.

Markets have lurched from one direction to another; interest rates have lifted faster than expected, with the possibility of more increases in the months ahead, and there’s no end in sight to the global uncertainty.

While the market shocks are interspersed with periods of relative calm, The Reserve Bank of Australia (RBA) warns that the disruption could pose challenges to our financial stability.i

Nonetheless, the RBA says Australia is “well placed” to handle the uncertain times.

For those heading into retirement and focused on income security rather than speculation, having a clear view of the different retirement income options can help.

Account-based pensions

One of the most common retirement income options is an account-based pension, often started using superannuation savings. Your money stays invested, and you draw a regular income from the account, choosing the payment amount (subject to minimum annual withdrawals set by law) and the investment mix.ii

The appeal here is flexibility. You can adjust payments and investment options, and the remaining balances can be left to beneficiaries in your will.

On the other hand, account-based pensions are directly exposed to market movements. So, when markets fall, your account balance may be affected. That could reduce your future income particularly if you continue withdrawals during a market downturn.

The risk is most significant in the early years of retirement. Losses combined with regular withdrawals can permanently reduce how long savings last, a challenge known as sequencing risk. Understandably, many retirees respond by spending less than they could afford, even when markets recover, simply to avoid the fear of running out of money later in life.iii

Lifetime annuities

Annuities offer a different approach. In return for a lump sum investment, annuities pay a guaranteed income either for a fixed period or for the rest of your life. Because the payments are not linked to daily market values, they could deliver a strong sense of certainty, particularly when it comes to covering essential living costs.iv

Some annuities provide fixed payments, some increase with inflation and others offer income linked partly to investment markets while still guaranteeing payments for life. These alternative styles of annuities aim to balance stability with the potential for higher long‑term income.

Combining income streams

Rather than choosing between flexibility and certainty, retirees may benefit from using more than one income stream. This approach combines a guaranteed income source with a more flexible one.

For example, a lifetime annuity might be used to cover the basics such as housing, food and utilities, while an account‑based pension funds discretionary spending, travel or unexpected expenses. Research suggests this could lead to more stable income and greater confidence to spend, even when investment markets are volatile.v

By making sure that your essential expenses are met regardless of market conditions, you may be less likely to panic or reduce spending during downturns.

The Age Pension

The Age Pension is an important part of the retirement income picture for many. It provides a government backed, inflation‑linked income that is not affected by market performance. For eligible retirees, it can act as a valuable safety net later in life, particularly if personal savings decline.

Some lifetime income products receive concessional treatment under the Age Pension assets test, which can improve eligibility or payment levels. Understanding how different income streams interact with Centrelink rules can affect retirement outcomes.vi

Retirement income is about what fits, not forecasts

There is no single best retirement income option. Each comes with trade‑offs between flexibility, risk, growth potential and control. What matters most is how well an income strategy matches your spending needs, risk tolerance and desire for certainty.

The right structure, could help to reduce stress and support more confident spending in retirement. Uncertainty doesn’t have to mean insecurity.

Talk with us about structuring a retirement income approach that fits your priorities and your circumstances.

i The Global Macro-financial Environment | Financial Stability Review, March 2026 | RBA

ii Income streams | Australian Taxation Office

iii Which super funds offer income for life? | SuperGuide

iv, vi Income streams – Age Pension | Services Australia

v How product layering can support retirement outcomes | ASFA

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2026-27 Federal Budget: The TAX take away

Jim Chalmers’ fifth Budget included significant tax reforms with the package billed as “the most significant tax reform package in more than a quarter of a century”.

While Australian workers and small businesses are likely to be happy, property investors and those with discretionary (family) trusts face new rules and tax rates that will require careful review.

The package was announced against a backdrop of global uncertainty and demographic change, with the Treasurer emphasising the tax reforms represent a key component in the government’s response to intergenerational inequality and challenges to national resilience.

Tax offset and instant deduction for individuals

Over 13 million workers will benefit from a new annual $250 Working Australians Tax Offset from 1 July 2028. This will increase the effective tax-free threshold for workers to $19,985.

The offset is in addition to announced cuts to the lowest tax rate on 1 July 2026 – when the rate drops to 15 per cent – and on 1 July 2027 (14 per cent).

The Budget included a new $1,000 instant tax deduction for work-related expenses from 2026-27, reducing paperwork requirements for employees claiming these deductions.

Incentives for business

With cash flow a key issue for smaller businesses, the Budget included measures to make the popular $20,000 instant asset write-off permanent from 1 July 2026.

It also permanently reinstated loss carry backs. From 2026-27, eligible companies making a loss in the current income year will be able to use the loss to obtain a refund against tax paid in the prior two income years.

From 2028-29, small start-ups will be able to access cash flow support through a refund for tax losses in their first two years of operation, up to the value of fringe benefits tax (FBT) and withholding tax paid on employee wages.

Businesses will gain flexibility to opt in to monthly PAYG instalments from 1 July 2027 and will receive a 25 per cent FBT discount for eligible electric cars over $75,000 from the same date.

Incentives for venture capital and R&D

From 1 July 2027, tax incentives for venture capital will be expanded through changes to the Early-Stage Venture Capital Limit Partnership and Venture Capital Limit Partnership programs.

The offset for experimental core R&D will also be increased by around 25 to 50 per cent, together with an increased turnover threshold for the refundable offset and a new $200 million maximum expenditure cap.

Negative gearing reforms

Two significant changes to existing tax rules for property investments were announced in the Budget.

Negative gearing will no longer be available for established residential properties from 1 July 2027. For all properties held prior to Budget night, the existing tax arrangements will remain unchanged.

Investors who purchase new builds will still be able to deduct their losses from other income.

Purchasers of established housing after the Budget announcement, however, will only be able to deduct losses against residential property income. Unused losses can be carried forward to future years but will no longer be deductible against other income (such as wages).

CGT discount rule changes

Another major change is replacement of the current 50 per cent capital gains tax discount with cost-based indexation from 1 July 2027.

The government is also introducing a minimum 30 per cent tax rate on capital gains starting on the same date.

The CGT change will only apply to gains arising after 1 July 2027, with investors in new builds given a choice of the 50 per cent CGT discount or the new arrangements.

Minimum tax rate for discretionary trusts

The tax change likely to generate the most criticism is a new minimum taxation rate of 30 per cent for discretionary trust distributions from 1 July 2028.

The new rate will not apply to fixed trusts, super funds, special disability trusts, deceased estates and some types of farming income.

Rollover relief will be available for three years from 1 July 2027 to assist small businesses and others wishing to restructure in light of the new rules.

Information in this article has been sourced from the Budget Speech 2026-27 and Federal Budget Support documents.   It is important to note that the policies outlined in this article are yet to be passed as legislation and therefore may be subject to change. 

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