What can businesses claim as a tax deduction?
12 June 2022
5
min read
The end of the financial year is upon us and that means getting your tax affairs in order. Any business, large or small, will have a range of expenses it can claim as deductions, which in turn will determine how much tax must be paid.

Knowing what you can legitimately claim as a tax deduction is smart business, not least because as a business owner you don’t want to be paying more tax than you are legally required to. You also don’t want to attract the wrong sort of attention from the Australian Tax Office (ATO) for making ineligible claims – that might trigger an audit, which could be time-consuming and expensive.
The ATO says there are three general principles to help you determine whether an expense is a valid business deduction1:
1. It’s strictly business
Most expenses you incur for the purposes of conducting your business – not for private use – are eligible for a tax deduction. This can be anything from office stationery to international travel; cleaning services to the purchase of heavy machinery. Some businesses will be able to claim things that others can’t, depending on the nature of their work.
2. Don’t mix business and pleasure
Expenses that have been incurred for a mix of both business and private use – such as travel, for example – need to be treated carefully. You can only claim the part of the expense that was used for business.
3. You must be able to prove it
Comprehensive and accurate record keeping is important. If you make a claim for a deduction, the ATO may ask you to verify the claim, so make sure you keep all relevant paperwork.
The ATO defines a record as containing “enough information for us to determine the essential features or purpose of the transactions, so we can understand the relevance of the transactions to your business's income and expenses”. Receipts, meeting minutes, diaries, and any other documentation you might have to back up your claim must be kept for a minimum of five years.2
What you cannot claim
There are some expenses the ATO will not allow.3 These include entertainment expenses, traffic fines for company vehicles, and domestic expenses, such as childcare or home housekeeping.
You can’t claim expenses relating to income earned that is not assessable, such as money made from a hobby. You are also not permitted to claim the GST you paid on a purchase if you can claim it as a GST credit on your business activity statement.
There are other exclusions, too. If you are unsure of what you can or can’t claim, you may want to consider seeking the advice of a tax professional.
Superannuation payments are tax deductible, too
If your business has employees, you are required to make regular payments into their super funds under the rules of the Superannuation Guarantee (SG) for eligible employees only. Employers are required to make SG payments at least four times a year.
Making your contributions on time means you can claim them as a tax deduction4, and avoid being charged any penalties by the ATO. More information about your super responsibilities as an employer can be found here.
1. Business tax deductions, ato.gov.au/business/income-and-deductions-for-business/deductions/, accessed 16 May, 2022.
2. Overview of record-keeping rules for business, ato.gov.au/business/record-keeping-for-business/overview-of-record-keeping-rules-for-business, accessed 16 May, 2022.
3. Business tax deductions, ato.gov.au/business/income-and-deductions-for-business/deductions/#whatyoucantclaim, accessed 16 May, 2022.
4. Claiming a tax deduction for workers’ salaries, wages and super contributions, https://www.ato.gov.au/business/income-and-deductions-for-business/deductions/deductions-for-salaries,-wages-and-super/, accessed 16 May, 2022.