The end of financial year is nigh, which means one thing for sole traders… it’s time to sort out your claims! As a sole trader, you can claim a deduction if the expense is directly related to the running of your business. Below, you will find a list of what you can and can’t claim as a sole trader.

What you can claim

Business asset purchases of up to $20,000: If you purchase a vehicle or equipment for your business that costs less than $20,000, you could be eligible for an instant deduction. In order to be eligible, this vehicle or equipment must be ready to use by 30th June 2018 and your business will have a turnover less than $10 million.

Prepaid expenses: You can claim a deduction on some prepaid expenses relating to your business. For example, if you pay a yearly business insurance premium before 30th June 2018, you may claim this in your tax return.

Business establishment costs: If you have started a new business in the 2017-2018 financial year, you can claim deductions for the costs of starting up your business. This includes relevant government fees such as company registration and the cost of seeking professional advice from your lawyer or accountant.

Account and loan expenses: You can claim back the fees on your business banking accounts and business loans.

Working from home expenses: If you work from home, then you can claim a portion of some of your home expenses such as internet, rent and utilities for the portion of time that you use your home to work from.

Motor vehicle use: As a sole trader, you can claim a tax deduction for use of a motor vehicle that your business owns, leases or hires under a hire purchase agreement. A claim can only be made if the vehicle is being used for business purposes. Motor vehicle expenses can include fuel, repairs and maintenance, insurance, registration and interest on loans. There are several other types of deductions which you may be able claim including travel expenses such as bus fares and taxi fares and overnight travel expenses.

What you can’t claim

There are certain expenses you can’t claim in your tax return. Furthermore, there are some expenses where you may be able to make a partial claim based on the proportion of time that you use the expense for business purposes.

Entertainment expenses:  If you are a sole trader, you cannot make a claim for entertainment expenses.

Fines: Fines are not tax deductible. For example, if you incurred the traffic fine during working hours or in the course of business, you cannot make a claim.

Private expenses: Private expenses may include childcare fees and school fees. While enrolling your child in childcare may be necessary for you to work and may enable you to undertake more work, it is not considered a business expense and therefore cannot be claimed.

Goods and Services Tax (GST): If you have already made a GST credit claim on your business activity statement (BAS statement), the GST component of purchases of goods and services cannot be claimed.

Self-education costs: If you’re running your own business, then education is an essential to ensure you are at the top of your game. While you can make a claim on education relating to your current business, you cannot make a claim for self-education relating to different area of business. For example, if you are lawyer, you can make a claim on a property law course, but you cannot make a claim if you decide to change career paths and enrol in a floristry course.  

In order to make the most of your tax return, you need to be making a claim on each eligible expense for the financial year. Having an experienced accountant on your side and a system to keep on top of your receipts, will help you achieve just that. The above blog is by no means an exhaustive list of what can and cannot be claimed. To find out more, you should contact your tax accountant.

This information is for general information purposes only and does not claim to be comprehensive. This is not tax advice or financial advice and any reliance on this information is solely at your own risk. We exclude any liability or responsibility for any loss which may arise from reliance upon information appearing in this blog, or arising from access to, or use of, information provided on this blog.