Sole Trader Expenses in Australia: What to Claim and Keep

Short answer: As an Australian sole trader you can deduct an expense to the extent you incurred it in running your business, apportioned wherever there is private use. The ATO’s three golden rules are that the cost must be for the business, split where it is mixed, and backed by records. Home office running costs can be claimed at the fixed rate of 70 cents per hour for 2024-25 and 2025-26. Photos of receipts count where they are true and clear copies, and business records must be kept for five years.

Australia’s income year runs 1 July to 30 June, and the ATO names each year by the date it ends, so the “2026 tax year” means 1 July 2025 to 30 June 2026. Every rule and figure below comes from the Australian Taxation Office and assumes a resident sole trader with a standard 30 June year end. For the surrounding picture — rates, GST and deadlines — see sole trader taxes in Australia, and for where these numbers eventually land, the sole trader tax return.

What can I claim as a business expense as a sole trader?

The ATO frames it as three golden rules, and almost every argument about a deduction is really an argument about one of them:

• The expense must have been for your business, not for private use.
• Where the cost is mixed, you claim only the business portion.
• You must have records to prove it.

The second rule does most of the work. An expense does not have to be wholly business to be claimable, and it does not become wholly claimable because part of it was. A phone plan used 60% for work is a 60% deduction, and you need a defensible basis for that 60% rather than a feeling about it. Underneath sits the capital line: anything giving you value beyond this year is an asset, so you claim decline in value rather than the full cost.

If you are registered for GST, claim income tax deductions on the GST-exclusive amount. The GST comes back through your BAS, so including it in the expense figure claims the same money twice.

What expenses can I claim as a sole trader in Australia?

Category	What you claim	The catch
Home office running costs	70c per hour for 2025-26, or actual costs	The fixed rate needs a record of every hour
Occupancy costs (rent, interest, rates)	Floor-area share	Only for a genuine “place of business”
Motor vehicle	Cents per kilometre or logbook percentage	Cents per km caps at 5,000 business km
Phone and internet	Business proportion of the bill	Already inside the fixed rate if used
Tools, equipment, computers	Under $20,000 outright to 30 June 2026; otherwise decline in value	Must be installed ready for use in the year you claim
Software and subscriptions	Business-use portion	Personal streaming and the like are private
Insurance and professional fees	Business cover, accountant, legal advice	Life and income protection follow other rules
Business travel	Fares, accommodation, meals while away overnight	Travel diary needed for 6 or more nights
Materials, stock, subcontractors	Direct cost of what you sell or install	Contractor payments trigger a TPAR in listed industries
Interest and bank fees	Interest on money borrowed for the business	Only the business share of a mixed loan

The $20,000 instant asset write-off applies to eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2026, for small businesses with aggregated turnover under $10 million that apply the simplified depreciation rules. Making the $20,000 limit permanent from 1 July 2026 was announced on 12 May 2026 in the 2026-27 Budget, but the ATO still recorded that measure as not yet law in late June 2026. If you are buying equipment in 2026-27, check the current status on ato.gov.au before you rely on an immediate deduction.

A TPAR (taxable payments annual report) is not triggered by paying contractors generally. It applies to businesses supplying building and construction, cleaning, courier or road freight, IT, or security, investigation or surveillance services, and outside building and construction only where those services are 10% or more of your business income. Where it applies, it is due 28 August.

How do I claim a home office as a sole trader in Australia?

The ATO splits home-based business costs into two buckets, and most sole traders are entitled only to the first.

Running expenses — electricity and gas, phone and internet, stationery and computer consumables, cleaning, and the decline in value and repair of equipment and furniture — can be claimed by any sole trader genuinely working from home, even from a desk in the lounge room, with no area set aside. For the usage costs you choose between the fixed rate and actual costs.

Income year	Fixed rate per hour worked at home
2024-25 and 2025-26	70 cents
2022-23 and 2023-24	67 cents
2020-21 and 2021-22	52 cents

The ATO publishes the rate income year by income year, and at the time of writing it had not published one beyond 2025-26. Before claiming for a later year, check the current figure on the ATO’s fixed rate method page rather than carrying 70 cents forward.

One rate covers energy, phone, internet, stationery and consumables together. You can still claim decline in value on the desk, chair and computer separately, plus repairs and maintenance on them and the cleaning of a dedicated office, because none of that sits inside the rate.

The condition that catches people is the record. To use the fixed rate you need a record of the total hours you worked from home across the entire income year — a timesheet, roster, diary or app. An estimate is not accepted, so a four-week sample projected across the year will not do. You also need at least one bill or receipt for each of the running expenses the rate covers, to show you actually incurred them. Without the hours you are back to actual costs, which means apportioning real bills.

Occupancy expenses — rent, mortgage interest, council rates, land tax, house insurance — are a different matter. A floor-area share is claimable only where an area of your home has the character of a place of business. The ATO’s signs of that are: clearly identifiable as a place of business, not readily suitable or adaptable for private use, used exclusively or almost exclusively for the business, and used regularly for visits by clients. A workshop with signage and its own client entrance might qualify; a laptop on the kitchen table does not. If the personal services income rules apply to what you earn, you may not be able to claim occupancy expenses at all.

There is a price attached, and it is worse than most people expect. Where an area of your home is set aside and used exclusively as a place of business and you are entitled to claim occupancy expenses, the main residence exemption no longer covers that portion of the home — and the ATO applies this even if you never actually claimed the mortgage interest. A slice of the eventual capital gain becomes taxable, worked out on the same percentage you could have claimed, generally the floor area. For most freelancers the annual deduction is smaller than the future CGT bill. Get advice before starting.

What can I not claim?

Cost	Treatment
Private and domestic expenses	Not deductible
Travel between home and your place of business	Private, unless you run a home-based business and the trip was for business
Entertainment — client lunches, tickets, functions	Not deductible, other than entertainment provided as a fringe benefit
Conventional clothing	Not deductible; occupation-specific and protective clothing, and distinctive uniforms, are
Traffic fines and other penalties imposed under Australian law	Not deductible
ATO interest charges — GIC and SIC — incurred on or after 1 July 2025	No longer deductible — this changed recently
Money you draw for yourself	Not a wage and not a deduction

Where deductions push the business into a loss, the non-commercial loss rules decide whether that loss can be offset against your other income this year, or deferred to a later one. Two hurdles apply. First, an income requirement: the total of your taxable income, reportable fringe benefits, reportable super contributions and net investment losses must be under $250,000. Then you must pass one of four tests — the one most freelancers meet is assessable income from the business activity of at least $20,000. Miss either and the loss is deferred, unless the Commissioner exercises a discretion.

Cars run on their own regime. The cents per kilometre rate is 88 cents for both 2024-25 and 2025-26, capped at 5,000 business kilometres per car, and it covers fuel, registration, insurance, servicing and depreciation together, so nothing may be added on top. The ATO had not published a rate beyond 2025-26 when this was written, so check the current figure on the ATO’s cents per kilometre method page before claiming for a later year. Cents per kilometre versus the logbook works through which pays better.

Do I need a receipt for every expense?

You need a record for every expense. Needing a document from the seller is a related but separate question.

The $300 no-receipts concession people repeat is a work-related expense rule. The ATO sets it out among the record-keeping exceptions for work-related expenses — the costs you incur earning salary and wages — and even there it does not allow an automatic deduction: you still have to show you spent the money and how you worked out the claim. It is not an allowance you can apply to business deductions on a sole trader schedule. A bank line reading “Bunnings $214.60” proves money left an account, not that it was spent on the business.

For GST there is a hard threshold. You must hold a tax invoice to claim a GST credit on any purchase costing more than $82.50 including GST. At or below that, a tax invoice, cash register docket, receipt or invoice is enough, and if you cannot get one, a diary entry showing the supplier’s name and ABN, the date, a description and the amount. If a supplier has not issued a tax invoice you can ask, and they have 28 days to provide one — wait for it before claiming the credit, even if that pushes the claim into a later BAS. Invoicing as a sole trader covers what your own bills must show, and what a receipt is explains why the two documents do different jobs.

Two extras are easy to forget. Business travel that keeps you away from home for six or more consecutive nights needs a travel diary, and the ATO expects each business activity recorded as you go — its nature, the date and rough start time, how long it ran, and where. And the cents per kilometre method needs no fuel receipts at all, but you must be able to show how you worked out the kilometres.

Does the ATO accept photos of receipts?

Yes. The ATO accepts images of business paper records stored digitally, provided the copies are true and clear reproductions of the originals and meet the five record-keeping rules. Once you hold a copy of that standard, you do not have to keep the paper — unless some other law or regulation requires you to hold the original.

The ATO calls creating a digital version of paper EFTPOS merchant receipts good practice, because the details on some of them fade over time. A shoebox of blank thermal slips satisfies nobody five years later.

Three conditions travel with digital records. They must be in English or readily convertible to English; stored so they cannot be altered or damaged, with the data reconstructable if you change systems; and produced on request in a standard format, with keys or passwords supplied where files are protected.

How long do I have to keep receipts and records?

Five years for most business records. The clock generally runs from when you prepared or obtained the record, or completed the transaction it relates to — whichever is later. That last phrase matters: a five-year contract signed today is not safe to destroy in five years’ time. Some records have their own start date under the law, and you also need to keep a record long enough to cover the period of review for any assessment that relies on it, or for any later return that reuses the same figure.

Record	How long
Most business records	5 years
Depreciating assets	As long as you hold the asset, plus 5 years after disposal
CGT assets, including a home used for business	As long as you hold the asset, plus 5 years after disposal
Logbook and odometer records	5 years after the end of the latest income year you rely on them

One distinction is easy to miss. For individual deductions the ATO says to keep written evidence five years from the date you lodge the return; for business records it counts five years from the later of preparing the record or completing the transaction. A sole trader sits under both framings depending on the record, so treat whichever gives the later date as the one that governs. The ATO’s record-keeping rules for business set out the detail.

Where does Keel fit into this?

Five years is a long time to be responsible for a shoebox, and the work is not hard so much as relentless — a docket handed over in a carpark, a trip logged between jobs.

Keel: Invoice Maker & Receipts, by Ilura Technology OÜ, is built for that job and nothing else. It runs entirely on your iPhone: no account, no sign-in, no bank connection, no cloud sync. Its App Store privacy label reads “Data Not Collected”.

The honest tradeoff is that nothing imports itself. There is no bank feed quietly reconciling last week — you create the invoice, you photograph the receipt (Apple Intelligence reads the merchant, total, tax and date on device), you log the trip. In exchange the records stay in your hands, the ledger is append-only and hash-chained, and at 30 June the Accountant Pack exports the whole year as a CSV plus a one-page summary PDF you can hand over.

The free tier includes unlimited invoices, receipts and mileage, with a “Made with Keel” footer on invoices. Keel Pro is a one-time $249.99 Lifetime purchase, not a subscription. Keel: Invoice Maker & Receipts on the App Store.

Frequently asked questions

What expenses can I claim as a sole trader in Australia? Any cost incurred in running the business, apportioned where there is private use. The usual claims are home office running costs, motor vehicle, phone and internet, tools, software, business insurance, accountancy fees, business travel, materials and subcontractors, and interest on business borrowing. Private costs, fines, entertainment and conventional clothing are excluded.

How much can I claim for a home office as a sole trader? Running expenses at the fixed rate of 70 cents per hour worked from home for the 2024-25 and 2025-26 income years, covering energy, phone, internet, stationery and consumables. Check the ATO for later years rather than assuming the rate holds. Decline in value on furniture and computers is claimed on top. Occupancy costs such as rent and mortgage interest are claimable only where an area is a genuine place of business, and being entitled to claim them costs you part of your main residence exemption.

Does the ATO accept photos of receipts? Yes. The ATO accepts digital images of paper records where the copy is a true and clear reproduction of the original and meets the five record-keeping rules, and you no longer need the paper unless another law requires the original. It calls digitising EFTPOS merchant receipts good practice, because the details on some of them fade. Business records must be in English or able to be easily converted to English.

How long do I have to keep receipts as a sole trader in Australia? Five years for most business records, counted from when you prepared or obtained the record or completed the transaction, whichever is later. Records for depreciating assets and CGT assets must be kept for as long as you hold the asset plus five years after you dispose of it. Records cannot be altered and must be produced on request.

Can I claim expenses without a receipt in Australia? Not as a matter of course. The $300 rule people quote is a record-keeping exception for work-related expenses — the costs of earning salary and wages — and even then you must still show you spent the money and how you calculated the claim. It is not a licence to claim business deductions without records. For GST you must hold a tax invoice to claim a credit on any purchase over $82.50 including GST.

Do I claim expenses including or excluding GST? If you are registered for GST, claim the GST-exclusive amount as an income tax deduction and recover the GST through your BAS. If you are not registered, claim the full GST-inclusive amount, because that is the real cost to you. Doing both claims the same money twice.

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This article is general information, not tax advice. Consult a qualified Australian tax professional.