The 2021/2022 financial year in Australia will be ending on 30 June 2022. If you’re still finalising your records, don’t forget to claim your business expenses as tax deductions to reduce your taxable income. This way, you can have additional cost savings for your business.


Tax-deductible business expenses

Here are the types of business expenses you can claim, including information on when and how you can claim your deductions for each type of expense.


1. Motor vehicle expenses

The expenses you’ve incurred from using motor vehicles for business purposes are eligible for tax deductions.

Here are the common types of motor vehicle expenses you can claim:

  • Fuel and oil
  • Insurance cover premiums
  • Interest on a motor vehicle loan
  • Repairs and servicing
  • Registration 
  • Lease payments
  • Depreciation or decline in value

If you use the motor vehicle for business and private purposes, you should identify when you’ve used it for business use. A way to justify your claim is by keeping a logbook or diary to separate business travels from private use. You must also keep your tax invoices, registration papers, loans or lease documents and details on how you calculated your claim as supporting documentation.

The Australian Taxation Office (ATO) also provides a comprehensive guide on claiming the motor vehicle expenses of your business. Access the guide here.


Related: What You Need to Know about the Loss Carry Back Tax Offset


2. Home-based business expenses

You can also claim expenses you’ve incurred from running a home-based business.

Your business is considered home-based if your home, or a portion of your home, is used for business activities.

The expenses you can claim are in the following categories:

  • Occupancy expenses – These are the expenses you pay to own or rent your home (e.g., mortgage interest or rent, council rates, land taxes, house and contents insurance).
  • Running expenses – These are your utility bills or maintenance expenses (e.g., electricity, phone, internet, furniture, cleaning).
  • Motor vehicle expenses on business trips between your home and other locations.



3. Business travel expenses

When going on a business trip, you can claim deductions for your travel expenses as long as you have records to support your claim. 

The best way to account for your business travel expenses is by keeping a travel diary. Your travel diary records the details of each business activity such as the date and time of the activity, its nature, duration and the location where you engaged in the business activity.

Meanwhile, the types of expenses you can claim are:

  • Airline, bus, train, tram, taxi or other ride-sourcing fares
  • Car hire fees and the costs associated with using the car for business purposes (e.g., parking, tolls, fuel)
  • Accommodation and meals for overnight travel. To claim this, you must have a permanent home elsewhere. The reason for the overnight stay should also be for official business.

All expenses associated with private matters (e.g., sightseeing and family visits) are not eligible for a tax deduction.



4. Workers’ salaries, wages and super contributions

Tax deductions also apply to your workers’ salaries, wages and super contributions because they’re classified as operating expenses.

The deductions you can claim depend on the type of your business — sole trader, partnership or company/trust. A separate rule also applies when you engage a contractor to complete a service for your business.

Visit the ATO webpage to learn how you can work out your deductions for salaries, wages and contributions.



5. Repairs, maintenance and replacement expenses 

You can also claim expenses on repairs, maintenance or the replacement of machinery, tools or premises used to generate income. However, take note that these expenses should not be capital expenses or money spent to buy assets.



6. Other operating expenses 

Other operating expenses not listed can also be eligible for tax deductions. These are the expenses you incur from your daily business operations such as advertising and sponsorship, bank fees and charges, public relations, stationery and more. For the full list, read here.



7. Depreciating assets and other capital expenses

  • Depreciating asset expenses are the costs incurred from assets with limited life expectancy. It declines in value over time. Examples are machinery and equipment, motor vehicles, computers, mobile phones and landlines.
  • Capital expenses are also eligible for tax deductions. But instead of claiming the entire amount in a single financial year, it takes a period of time before you can claim its full amount. 

Check out the rules for working out your deductions for depreciating assets and capital assets here.



8. Carbon sink forest expenses

If your business has carbon sink forestry projects or carbon sequestration activities, you may be eligible for this deduction. Carbon sink forest expenses are considered capital expenses, so they cannot be claimed on a one-off basis. 


When can you claim these expenses?

  • Operating expenses – in the financial year you incur the business expenses
  • Capital expenses – over a longer period


Work with tax accountants in identifying your tax deductions

Preparing your tax returns can involve a great deal of work, a strong understanding of taxation law and lots of care. Aside from your actual taxable income, you also need to take into account the possible deductions you can claim. If you need help in preparing and lodging your business tax return, contact us today. You can also check out our tax and compliance services for more information.

We’re working in partnership with CMPartners, a specialised tax accounting firm, to deliver the best tax results for you and to support your business.