It can be tricky to know exactly what you can and can’t claim on your tax return each end of financial year – so we asked the experts at the Australian Taxation Office (ATO) for their advice on some common queries. Whether you’re a small business owner or just want to know a few things about your individual tax return, ATO Assistant Commissioner and tax time spokesperson Anita Challen has the answers for you.

At a Glance: Your Tax Return Questions, Answered

What Are the 2025–26 Tax Changes for Small Businesses?

First, if you’ve purchased a vehicle for your business in the 2025-26 financial year, the car limit is $69,674. The car limit is the maximum cost you can use to work out the decline in value of motor vehicles designed to carry a load of less than 1 tonne and fewer than nine passengers.

If you’re a sole trader or in a partnership, you may be able to use the cents per kilometre method to work out your business-related car expenses. This rate is 88 cents per kilometre for the 2025-26 income year. If you use the cents per kilometre method, remember, this includes all your vehicle’s running expenses, including registration, servicing, fuel and insurance, and depreciation.

Did You Know? Eligible businesses with an aggregated turnover under $10 million can elect to use the simplified depreciation rules and deduct the business portion of the cost of eligible assets costing less than $20,000 in the 2025-26 income year. To claim the immediate deduction in 2025-26, the asset must have been first used or installed ready for use during the income year. The $20,000 instant asset write-off limit applies on a per asset basis, so small businesses can claim an immediate deduction for multiple assets, as long as the cost of each asset is less than the limit.

Can I Claim Lollies Provided to Clients During Meetings?

You can claim a deduction for most business expenses you incur, as long as they're directly related to earning your income. When it comes to lollies for client meetings, you can claim them if they're provided to clients. The amount of your deduction will depend on whether any of the lollies you have purchased are for private consumption, like if you take a bag home with you, in which case you’d need to reduce your deduction.

SEE ALSO: Tax Return Tips to Get the Most Out of Your Return

How Do I Claim Internet and Phone When I Run My Business From Home?

When it comes to running expenses, like internet usage, you will need to work out the portion of the expense that relates to your business use. You can only claim a deduction for the business-use portion. If you run your business from home, there are a few ways to work out your running expenses, but you need to ensure: 

  • it's reasonable in your circumstances 
  • you exclude the percentage of costs associated with your private living costs
  • you have records to show how you calculated the expense. 

You can calculate your running expenses using the fixed rate method, floor area method or actual cost method – whichever works best for your situation. The fixed rate method allows you to claim a set rate per hour and covers your home and mobile data expenses, phone usage, electricity, stationery and computer consumables (like printer ink). If you are using this method, you can’t claim a separate deduction for these expenses. 

Are Office Decor Items Deductible for My Business?

If you have a home office, decorative items like flowers or art are generally not tax deductible because they don’t directly relate to the running of your business. If you have a dedicated space for your business, you may be able to claim a deduction for decor, as long as it’s used for commercial and business purposes. If you’re purchasing art for a dedicated office space, the art will generally be a depreciating asset and you will need to claim your deductions for its decline in value over time.

What Baseline Business Expenses Can I Claim?

A person reviewing finances and budget at a table in a restaurant setting.

There’s no one-size-fits-all approach to claiming deductions for a business. As mentioned, you can claim a deduction for most expenses that directly relate to your business and earning your income. The types of business expenses you may be able to claim include your day-to-day operating expenses such as stationery or insurance, and purchases of products or services for your business. If your business acquired depreciating assets or incurred other capital expenses, you may need to claim your deductions for these expenses over a number of years.

There are three golden rules to remember when it comes to business deductions:

  1. The expense must have been for your business, available as an allowable deduction and not for private use.
  2. If the expense is for a mix of business and private use, you can only claim the portion that is used for your business.
  3. You must have records to prove it.

Hot Tip: You could track and store orders for easy collation at tax time, this is one of the many benefits of creating an Officeworks for Business account. It’s free to sign up with an ABN.

How you claim your deductions will depend on your business type and the methods you choose. The ATO website and small business tax time toolkit are great places to start when working out what expenses you can claim (and how), or you can speak with a registered tax professional. 

Can I Claim Pet Expenses for My Pug Who Welcomes Clients to My Grooming Business?

No, costs associated with maintaining animals are private in nature and not deductible, even if your pug welcomes your clients as they come in the door. The main question is whether the animal performs part of the income-producing activity for your business and contributes to the production of that income (for example, a working dog on a sheep farm who has been trained for their role from a young age), and is not treated like a pet. 

A person sitting, focused at a kitchen table, reviewing paperwork and making calculations with a calculator and laptop nearby.

As a Content Creator, What Props and Supplies Can I Claim?

What you can claim as a content creator depends on what your activity is. If you create make-up tutorials for Instagram and TikTok, then any make-up or props featured and used only in these videos may be deductible – as long as you’ve kept your receipts. Like other deductions, if the make-up or props are also used in your personal life, you can only claim a deduction for the portion of the cost associated with earning your income.  

As for whether you’re in business for tax purposes or not, generally, a business involves a set of continuous and repeated activities you do with the intention of making a profit. Your income from this may be in the form of cash or non-cash goods, like flights or tickets to a concert.

Can I Claim a New Set of Paint Markers As a Business Expense? 

If you use the paint markers in carrying on your business, then yes, you can generally claim them. If you use the markers for a mix of business and private use, remember to only claim the portion that is used for your business. 

How Should I Split Work vs Private Costs When Claiming?

A person sitting at a desk using a calculator with one hand and holding a coffee mug with the other. A smartphone, a jar of coins and a notebook are also on the desk.

How you apportion your expenses will depend on your individual circumstances and the type of expense. For example, if you purchase a laptop that is only used in your business, you can calculate your deduction based on its full cost. However, if you use the laptop 50 per cent of the time for your business and 50 per cent of the time for private use, then you work out your deduction based on 50 per cent of its cost.

The key to claiming correctly is keeping good records to show how you have apportioned your expenses. 

What Tax Deductions Raise Red Flags With the ATO?

The ATO has sophisticated programs and technology to detect incorrect claims, but when it comes to deductions, we want you to get it right and claim what you are entitled to. The small business tax time tool kit is a great place to start if you are not sure what you can claim. 

Big deductions for travel or entertainment expenses, home-based business expenses and motor vehicle expenses can raise red flags for the ATO if the claim seems too high for the business.

It's important to apportion your expenses properly. If you are on a work trip and extend it by a couple of days to catch up with a friend, you can’t claim any accommodation or meals on the days you aren’t working, as they're private expenses. Good record keeping will ensure you are only claiming what you are entitled to. Your records need to:

If you’re a sole trader, you can use the myDeductions tool through the ATO app to record your expenses, work related trips and income. It makes it easier and more convenient to capture your expenses on the go and keeps everything in one place. 

I’m Required to Wear ‘Business Attire’ to Work. Can I Claim a Tax Deduction for Work Clothes?

You can’t claim a deduction for buying, hiring, repairing or cleaning conventional clothing you buy for work, even if your employer says you need to wear that clothing, or you only wear it to work. ‘Conventional clothing’ is everyday clothing worn by people regardless of their occupation (for example, black trousers worn by waiters, or business attire worn by office workers). You can’t claim those RM Williams boots just because you wear them to the office.

For a ‘compulsory uniform’ to be deductible, your employer must make it compulsory to wear that uniform through a strictly enforced workplace agreement or policy. A compulsory uniform must be sufficiently distinctive to your particular organisation, so a casual observer can clearly identify:

  • you as working for that employer 
  • the products or services provided by your employer.

You can learn more about deductions for clothes and items you wear at work on the ATO website.

‍If I’ve Used My Personal Car for Work, Can I Claim a Deduction? 

If you are an employee who uses your vehicle for work, you may be able to claim work-related car expenses using the cents per kilometre method or the logbook method. 

The cents per kilometre method allows you to calculate a set rate for each business-related kilometre travelled, up to a maximum of 5,000 kilometres. If you use this method, remember, it includes all of your vehicle’s running expenses, such as registration, servicing, fuel and insurance, as well as depreciation, so you can’t claim these separately. 

To calculate your deduction using the logbook method, you need to keep a logbook that shows your work-related trips for a continuous period of at least 12 weeks and keep receipts or other records of your car expenses.

Remember, you can’t claim your trips between work and home except in limited circumstances. You can learn more about trips you can and can’t claim on the ATO website.

I Work From Home Most Days. Can I Claim All of My Phone and Internet Usage?

A person sitting, using a laptop at a table in an open dining room setting with notebooks, a smartphone and another laptop nearby.

If you incur additional running expenses (such as for phone and internet usage) as a direct result of working from home, you can claim a deduction for those expenses. But remember, you can only claim the work-related portion of the expenses as a deduction.

The way you claim (and the amount you claim) for your phone and home internet usage will depend on the method you use to calculate your working-from-home deduction. If you’re eligible to claim a working-from-home deduction, there are two ways you can do this: the fixed rate method or the actual cost method. 

The fixed rate method allows you to claim a set rate for every hour you work from home, and covers your additional running expenses that are often difficult to apportion, such as your phone and internet usage, electricity and gas, stationery, and computer consumables (like printer ink). You can’t claim these items separately if you use the fixed rate method. If you also have expenses the rate doesn’t cover, such as decline in value of depreciating assets used for working from home, you can claim deductions for these amounts separately. 

Using the actual cost method, you work out your deduction by calculating the actual additional expenses you incur when working from home, such as your phone, data and internet expenses. Where you incur running expenses for both private and work purposes, you need to apportion your deduction. You can only claim the work-related portion as a deduction.

Whichever method you use, you’ll need to make sure you have the right records, or your deduction may be disallowed.

SEE ALSO: What Tax Deductions Can You Claim When Working From Home?

Are Bank or Credit Card Statements Enough Evidence for Deductions?

In most cases, a bank or credit card statement (on its own) isn’t a sufficient level of evidence to claim a deduction for work-related expenses. You’ll need a record that shows the business name of the supplier of the item or service, the amount of the expense, the nature of item or service you purchased, the day the expense was incurred and the date the document was produced. You will also need records to show the connection the expense has to your income and the portion of that expense that is work related. This could include purchase receipts, a logbook of your car journeys, records of the hours you work from home, and more – depending on your expense type. Your deductions can be disallowed if you’re not eligible or you don’t keep the right records. 

How Much Tax Will I Pay for the 2025-26 Financial Year?

You can check what your tax rate will be on the ATO website. The ATO also has a simple tax calculator that can work out just the tax you owe on your taxable income for the full income year. But it’s important to note that this is just a rough estimate that doesn’t include the Medicare levy, Medicare levy surcharge, or any study or training support loan repayments. 

It also doesn’t consider any deductions you may be able to claim, which is why it’s so important to keep good records of any work-related purchases where your employer doesn’t reimburse you.

If I Lodge My Tax Return Myself, What Should I Watch Out For?

If you’re lodging your own tax return, you will need to lodge by 31 October. While tax time starts on 1 July, it’s better to wait a few more weeks, after your income statement has been finalised by your employer and most of your other information has been prefilled into your return (saving you time!). 

Then, all that’s left is your deductions. Make sure you’re across the deductions you can claim; and claim no more, no less. Remember that you’re ultimately responsible for the claims in your tax return even though your agent might have prepared it and lodged it. Calculation rates and methods are always changing, so don’t just ‘copy and paste’ from prior years. 

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This is general information only. Seek professional financial and/or legal advice to determine the right outcomes for your business or individual needs.

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This article was originally published in April 2024 and has been updated.