Sole Trader Tax Deductions You Should Always Claim

Sole Trader Deductions

The types of sole trader tax deductions in Australia that you can claim vary depending on the type of work you do, but there are a number of deductions that are common for most sole traders.

Motor vehicle and travel

The most common tax deductions as a sole trader are for business kilometres and travel deductions. Expenses such as fuel, maintenance, and general wear and tear on your vehicle when used for business purposes are claimable tax deductions. Only the business portion of your vehicle’s usage can be claimed as a tax deduction for a sole trader, so you must keep a logbook of your vehicle’s mileage to record business usage. See how to keep an ATO-compliant logbook for tax time.

The Driversnote logbook app is a great way of keeping an accurate log of your business km so you can claim your business-related vehicle usage as a sole trader deduction.

Managing your tax affairs

It is mandatory to lodge your tax return each year, and so costs incurred in managing your tax affairs are tax deductions for a sole trader. Tax agent fees or consultation fees paid to your accountant are all sole trader tax deductions in Australia.

Office expenses

Every business needs to maintain its business records, send invoices and keep track of its expenses and payments. Subscriptions for accounting software, such as Xero or MYOB, or any business usage on your phone, computer equipment and other office supplies are all tax deductions for sole traders.

Insurance

Insurance is a highly recommended, if not a mandatory requirement for many industries. Professional indemnity insurance, public liability insurance or any other business-related insurance is a tax deduction for a sole trader.

Protective clothing, uniforms and laundry

Safety is a huge part of any job, and having the appropriate protective clothing and equipment is a requirement for staying safe in your workplace. Steel cap boots, high visibility clothing, and even masks and gloves are all considered protective clothing, and if you need them for your work as a sole trader, then you can claim them as a tax deduction.

Self-education expenses

In business, it’s important to keep up to date with the latest laws, techniques and technologies in your industry. Expenses incurred in self-education may be claimed as a tax deduction for a sole trader. The education must be directly related to your current business or trading activities and be shown to either maintain or increase your potential income in that field.

FAQ

Do sole traders get a tax rebate?

A sole trader is considered a small business, and as such may be eligible for the Small Business Income Tax Offset, which can reduce the tax you have to pay by up to $1,000.

Can a sole trader do their own tax return?

Yes, a sole trader can do their own tax return using the ATO’s myTax tool. If you choose to prepare and lodge your tax return, then the due date is the 31 of October each year and penalties may apply if you miss the due date. There are, however, complexities involved in separating business and personal expenses, and it’s a good idea to consider using a tax agent to properly identify your tax deductions as a sole trader. As noted above, the cost of managing your tax affairs is itself a tax deduction.

What is sole trader tax?

Because a sole trader business is considered to be the same legal entity as yourself, then any net income (your total revenue less claimable expenses) you have earned from being a sole trader is taxed at the normal individual marginal tax rate, plus the Medicare Levy of 2%.