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.
Usually, meals are a private expense. And usually, there is no tax deduction for private expenses. The tax laws relating to deductions specifically exclude private expenditure. This is why an employee or sole trader can't claim a deduction for meals they eat at work.
What is it? Under the instant asset write-off, you can write off the full amount you spend on an asset (used for business purposes) in the financial year you purchased it, giving you a tax deduction for the full cost of the asset immediately.
However if the annual turnover of your business is substantial then a company set up is worth considering, as companies pay a set tax rate of between 25% and 30% (depending on the company) whereas sole traders pay an individual tax rate (see below for specific rates).
Claiming capital allowances when self-employed
If you use the traditional accounting method, then longer-lasting items that you buy for business purposes (such as computers) will count as capital assets rather than expenses. You can however claim capital allowances on these assets.
To be clear, you can claim work expenses up to $300 without receipts IN TOTAL (not each item), with basic substantiation. This means that if you have no receipts for work-related purchases, you can still claim up to $300 worth on your tax return.
Businesses can claim credits for the fuel tax (excise or customs duty) included in the price of fuel used in their business activities. You can claim for taxable fuel that you purchase, manufacture or import. Just make sure it's used in your business.
The current sole trader tax rates for the 2023-24 financial year are as follows: Taxable income up to $18,200: 0% (tax-free threshold) Taxable income from $18,201 to $45,000: 19 cents for each $1 over $18,200. Taxable income from $45,001 to $120,000: $5092 plus 32.5 cents for each $1 over $45,000.
Can I claim my car registration on tax? Yes, assuming you use the logbook method to claim car expenses, you can claim the cost of your car registration on tax. "Make sure you only claim for the work-related portion of the registration, not for any private journeys," Mr Chapman says.
Can I claim my mobile phone as tax deduction? The answer is YES. However, you must genuinely use your mobile phone for work purpose to be eligible to claim a tax deduction. Example: Often people use their mobile phone during work or after work hours to contact staff & management.
You can claim a maximum of 5,000 business kilometres per car, per year. You do not need written evidence, but you need to be able to show how you worked out your business kilometres. There is more information on record keeping and written evidence in Keeping tax records for specific expenses.
You generally can't claim clothes that are private in nature, even if you do wear them for work. This type of clothing includes corporate office attire, black pants, jeans, sneakers, and other everyday shoes. However, there are a few cases in which you can claim clothing and laundry expenses.
If you are a registered Sole Trader and need a vehicle for business purposes, buying a car using your ABN as a business asset is the smarter way to go. If your business is registered for GST, you may even be able to claim some of the expenses that come with owning a vehicle.
It is compulsory for businesses with a GST turnover of $75,000 or more to have an ABN and to be registered for GST. Businesses with a GST turnover of less than $75,000 can still apply for an ABN. You may choose to register for GST once you have an ABN.
You can claim a maximum of 5,000 business kilometres per car per income year using the cents per kilometre method. Rates are reviewed regularly so make sure you check the rate for the income year you are claiming for.
Laundry expenses
We consider that a reasonable basis for working out your laundry claim is: $1 per load if it only contains work clothing from one of the categories above. 50c per load if you mix personal items of clothing with work clothing from one of the categories above.
How much can I claim on tax without receipts? The ATO generally says that if you have no receipts at all, but you did buy work-related items, then you can claim up to a maximum value of $300 per year. Most people are eligible to claim more than $300 and this boosts their tax refund considerably.
You can claim up to a maximum of 5,000 business kilometers without written evidence, such as receipts or logbooks, for the financial year.
If you did washing, drying or ironing yourself, you can use a reasonable basis to calculate the amount, such as $1 per load for work-related clothing or 50 cents per load if other laundry items were included.
Use your own computer or laptop for work? If so, you can claim the year-by-year depreciation of the work-related percentage of it's value. If you claim a personal laptop or computer as a tax deduction, it can add a good few dollars to your tax refund.
With limited exceptions relating to travel and overtime, the cost of food and drink is private and not deductible.
As a sole trader, you have absolute control over your business, its assets and profits after tax.
You keep a diary for four weeks and find out that you use 20 GB of data for work and 80 GB of data for private purposes. This means that your work-related percentage is 20%. You can then claim 20% of your annual internet bill as a deduction, which is $192 ($80 x 12 x 0.2).