Tax for sole traders: What can I claim?

As a sole trader, being aware of exactly what you can claim will help you ward off a large tax bill when tax time looms.

In this article, we provide an overview of what you can claim as a sole trader, including unusual claims you might not be aware of and industry-specific tax deductions.

We also explain why it’s so important to seek professional accounting advice from experts like us.

Allowable deductions for sole traders

If your expenses relate directly to running your business and earning assessable income, you can claim them in your personal tax return.

According to the Australian Taxation Office, you can generally claim the following operating expenses in the year you incur them:

• Advertising
• Bad debts
• Home office expenses
• Bank charges
• Business motor vehicle expenses
• Business travel
• Education and training
• Professional memberships
• Insurance
• Interest
• Telephone bills
• Repairs/ maintenance
• Tax preparation costs.

Typically, depreciation on capital expenses, which are expenses that have a longer life, is claimed over several years. Examples include:

• Computers
• Electrical tools
• Furniture
• Motor vehicles
• Plants and equipment.

If an expense is for both business and private use, you can only claim the business portion.

As a sole trader, you cannot claim deductions for private or domestic expenses, entertainment, fines, nor expenses relating to income that is not taxable, such as money earned from a hobby.

RELATED: Is My Car Tax Deductible? Vehicle Expenses You Can Claim

Additional and unusual claims for sole traders

Did you know you can prepay your expenses, for a period of less than a year, and attract a tax deduction?

As a sole trader, you can prepay subscriptions, certain business travel expenses, training events and business asset repairs, for example.

Industry-specific tax deductions

The industry you work in affects your tax deductions.

For example, mechanics can claim the cost of using their car to travel between home and work if they’re transporting bulky tools and there is no secure storage on site.

Travel agents may claim expenses associated with attending conferences and industry promotions, including passport fees and travel insurance.

RELATED: How Do Small Businesses Deal With GST Payments?

Find a trusted accountant to do your business tax

Tax laws and regulations change frequently, which is why you need our help. At LDB, we assist sole traders to keep on top of their taxation affairs and make informed choices.

We know all about the less obvious tax deductions out there, as well as those that have recently become available.

Call LDB on (03) 9875 2900 or send us information via the contact form below to find out more.