What you can claim

You can claim a tax deduction for most expenses you incur in carrying on your business if they are directly related to earning your assessable income.
Types of business expenses you may be able to claim deductions for include:

• day-to-day operating expenses
• purchases of products or services for your business
• certain capital expenses, such as the cost of depreciating assets like machinery and equipment used in your business.

The amount of your deduction and when you can claim it will depend on the type of expense (for example certain capital expenditures are deductible over time) and whether it has any private or domestic purpose for which you must reduce your deduction. Also, some expenses are not deductible (for example fines).

There are 3 golden rules for the ATO accept as a valid business deduction:

1. The expense must have been for your business, available as an allowable deduction and not for private use.
2. If the expense is for a mix of business and private use, you can only claim the portion that is used for your business.
3. You must have records to prove it. 

What you can't claim

There are some expenses that are not deductible, such as:

• entertainment expenses, other than those you provide as fringe benefit
• traffic fines
• private or domestic expenses, such as childcare fees or clothes for your family
• expenses relating to earning income that is not assessible
• payments for which you have not met your PAYG withholding or reporting obligations – non-compliant payments
• the GST component of a purchase if you can claim it as a GST credit on your business activity statement.

The difference between an employee and an independent contractor depends on the nature of the working relationship and the terms of the contract. Employees work as part of your business, while contractors operate their own business and provide services to yours. Even if someone is a contractor, superannuation obligations may still apply in certain situations, particularly where the work is mainly for their labour.

​Apprentices, trainees, labourers, and trades assistants are generally always considered employees, while companies, trusts, and partnerships are treated as contractors. When hiring individuals, it is important to review the full working arrangement and contract to determine the correct classification for tax and super purposes.

Starting 1 July 2026, Australian employers must align superannuation guarantee (SG) payments with payroll cycles, ensuring funds reach employee accounts within 7 business days. This shift from quarterly to "Payday Super" requires contributions to be made alongside salary or wages. 

Key details include:

• Deadline: Contributions must arrive within 7 business days of pay day.
• New Hires: First contributions are due within 20 business days.
• Rate: The SG rate remains 12%.
• Compliance: Late payments incur the Superannuation Guarantee Charge (SGC) and potential Fair Work Act breaches
• Penalties:  From 1 July 2026, penalties are 25% or 50% of the unpaid SGC, depending on any prior penalties.​