In Australia, tax deductions reduce your taxable income by allowing you to deduct expenses directly related to earning your income, potentially leading to significant tax savings and larger refunds.
Understanding and claiming the right deductions is crucial for maximising your tax benefits. By keeping proper documentation and complying with Australian Taxation Office (ATO) regulations, you can take full advantage of the lawful deduction options available to you.
Whether you’re self-employed, an investor, or an employee, knowing which costs you can deduct is essential. ISM Accountants can help you claim all eligible deductions and ensure you get the most out of your tax return.
Want to make sure you’re not missing tax deductions in Australia 2025/26? Contact ISM Accountants today and get expert guidance tailored to your situation.
What is a Tax Deduction in Australia?
A tax deduction is a cost that can be deducted from your total income to lower the amount of income liable to taxation. Deductions reduce your taxable income, lowering the amount of tax you owe or increasing your chances of receiving a refund.
Key differences between tax benefits:
- Tax Deductions: Reduce your taxable income dollar-for-dollar.
- Tax Offsets: Directly reduce the amount of tax you pay.
- Rebates: Specific types of offsets that provide direct tax reductions.
For an expense to qualify for a deduction, it must be:
- Closely associated with generating your revenue
- Not personal or household in character
- Backed up by accurate documentation and receipts
Since inaccurate claims may result in fines, interest charges, and possible audits, it is imperative to comprehend ATO regulations. Accuracy is crucial because the ATO uses advanced data matching tools to compare your claims with data from third parties.
Confused about whether an expense counts as a deduction? Our team at ISM Accountants can review your situation and make sure you’re compliant while maximising your tax savings.
Recommended Read: Common Tax Deduction for Small Business
Types of Tax Deductions – Detailed Breakdown
Different types of tax deductions are:
1. Work-Related Expenses
Work-related expenses are among the most commonly claimed deductions and include costs directly related to performing your job duties.
Eligible work-related expenses include:
- Clothing and uniforms: Protective clothing, uniforms with company logos, and occupation-specific clothing
- Tools and equipment: Computers, mobile phones (work portion), professional tools
- Professional development: Memberships, subscriptions, conferences, and training courses
- Travel expenses: Between work sites, client meetings, and work-related travel
Vehicle expenses can be claimed using two methods:
- Cents per kilometre method: Up to 5,000 km per year at the ATO rate (85 cents per km for 2025/26)
- Logbook method: It requires detailed records but allows unlimited kilometres and all car expenses
Expense Category | Examples | Key Requirements |
Protective Clothing | Safety boots, hard hats, hi-vis vests | Must be occupation-specific |
Tools | Laptops, tablets, and professional software | Used primarily for work |
Travel | Fuel, parking, public transport | Between work locations only |
Communication | Mobile phone, internet | Work portion only |
Mobile and internet claims: You can only claim the work-related portion of your phone and internet bills. So, keep records showing business vs. personal use.
Unsure how to split personal vs work-related costs? Let ISM Accountants calculate your exact deductions so you don’t overclaim or miss out.
2. Home Office Expenses
As remote work becomes more common, home office deductions have changed quite a bit. The ATO offers two methods for claiming these expenses:
- Fixed-Rate Method (Simplified): For the 2025/26 tax year, you can claim 67 cents per hour for using your home office. This rate covers costs like electricity, gas, phone, internet, and stationery.
Just remember, you’ll need to keep a record of the hours you worked from home. - Actual Cost Method: With this method, you can claim the actual work-related portion of your expenses. This includes costs for electricity, gas, internet, phone bills, and even depreciation on your equipment. However, this method requires you to keep detailed records and do some calculations.
Work-from-Home Scenarios Post-COVID
Following COVID, many Australians continue to work remotely, although the regulations for claiming home office expenditures varies depending on your employment status:
- Employees: Can only claim home office expenses if they incur additional costs due to working from home. Occasional or flexible work-from-home arrangements may not qualify. The fixed-rate method (67 cents per hour) is commonly used, but detailed records of hours worked are required.
- Self-Employed: Have broader eligibility to claim home office expenses, including rent, utilities, depreciation on equipment, and other running costs proportional to business use. Detailed record-keeping is essential to substantiate claims.
Understanding these differences is essential to ensure tax compliance and maximise your deductions. ISM Accountants can help clarify your eligibility and guide you through the correct claiming methods.
There are several eligible costs you can consider while claiming home office expenses:
- Electricity and Gas: You can claim a portion of your electricity and gas bills for heating, cooling, and lighting your workspace.
- Phone and Internet Expenses: Only the work-related portion of your phone and internet bills can be claimed.
- Depreciation on Equipment: If you have computer equipment or office furniture, you can claim depreciation on these items.
- Stationery and Office Supplies: Costs for items like paper, pens, and other office supplies are also deductible.
Note:
The ATO has strengthened its record-keeping requirements for home office claims beginning with the 2025 tax year. To indicate how many hours you worked from home, keep accurate documentation, such as timesheets or work diaries. Keeping precise records can help confirm the validity of your claims and will prevent you from future problems.
ATO’s 2025 home office rules are stricter than ever. Book a consultation with ISM to stay compliant and maximise your refund.
3. Investment-Related Expenses
If you own rental properties or have share investments, you can take advantage of various investment-related expenses that can help reduce your taxable income.
For rental properties, you can claim expenses such as:
- Loan Interest Payments: The interest on your mortgage is deductible.
- Property Management Fees: If you hire a property manager, those fees can be claimed.
- Repairs and Maintenance: Costs for repairs and upkeep of the property are deductible.
- Insurance Premiums: Any insurance you pay for the property can be claimed.
- Depreciation on Fixtures and Fittings: You can claim depreciation on items like appliances and furniture in the property.
- Advertising for Tenants: Costs associated with advertising your rental property to find tenants are also deductible.
- Legal and Accounting Fees: Fees for legal advice or accounting services related to your rental property can be claimed.
Cryptocurrency and Digital Investments
With the increasing popularity of cryptocurrencies and digital assets, the ATO regards them as property for tax reasons. You can claim deductions for expenses associated with managing your digital investments, including:
- Transaction fees and brokerage costs
- Software or subscription fees for portfolio tracking
- Advisory or consultancy fees related to your crypto investments
It’s essential to keep detailed records of all transactions, including purchases, sales, exchanges, and transfers, to accurately calculate capital gains or losses. Personal use of cryptocurrency is generally not deductible.
For share investments, you can deduct expenses such as:
- Investment Advisory Fees: If you pay for investment advice, those fees are deductible.
- Portfolio Management Costs: Fees for managing your investment portfolio can be claimed.
- Interest on Borrowed Funds: If you borrow money to invest, the interest on those loans is deductible.
- Subscription Fees for Financial Publications: Costs for subscriptions to financial magazines or journals can also be claimed.
By keeping track of these expenses, you can effectively lower your taxable income and maximise your investment returns!
Investment Type | Deductible Expenses | Non-Deductible |
Rental Property | Interest, repairs, management | Capital improvements |
Shares | Advisory fees, interest on loans | Cost of shares themselves |
Managed Funds | Management fees, advice costs | Initial investment amount |
From rental property claims to share investments, ISM Accountants can help you structure your deductions strategically.”
4. Self-Education Expenses
Education expenses are deductible when they maintain or improve skills required in your current employment or are likely to increase your income from employment.
Eligible self-education expenses:
- Course fees and tuition
- Textbooks and course materials
- Stationery and equipment
- Travel to and from the place of education
- Accommodation and meals (if required to travel)
Important eligibility criteria:
- The course must relate to your current work activities
- It cannot be education that qualifies you for a new profession
- Must have a sufficient connection to your income-earning activities
Non-deductible education expenses include courses that only relate generally to your work or help you get different employment.
Recommended Read: Claiming Self-Education Expense in Tax Returns
5. Charitable Donations & Gifts
Donating to registered charities not only supports important causes but can also provide valuable tax deductions.
Deductible Donations
- Gifts of $2 or More: If you’ve donated of $2 or more to registered charities is tax-deductible.
- Donations to Approved Research Institutions: Contributions made to approved research organisations can also be claimed.
- Contributions to Political Parties: You can also deduct limited amounts donated to political parties.
- Gifts to Approved Environmental Organisations: If you offer donations to organisations focused on environmental causes, they are deductible as well.
Record-Keeping Requirements
To ensure your donations are deductible, you need to keep proper records, including:
- Receipts: Obtain a receipt from the organisation for your donation.
- ATO Registration: The organisation must be registered with the ATO as a deductible gift recipient.
- Voluntary Donations: The donation must be voluntary, and you should not receive any material benefit in return.
Non-Deductible Donations
It’s important to note that not all contributions are deductible. For example, raffle tickets, goods purchased from charity shops, or payments made directly to individuals in need do not qualify for tax deductions. If you understand these tax deductions, you can maximise your tax benefits while supporting the causes you care about!
6. Superannuation Contributions
Making personal superannuation contributions can offer great tax benefits, especially if you’re a high-income earner. Here are the types of deductible super contributions you should know about:
- Personal Deductible Contributions: You can contribute up to $30,000 annually for the 2025/26 tax year and claim a tax deduction for it.
- Salary Sacrifice Contributions: This is when you choose to have a portion of your pre-tax salary paid directly into your super fund, which can also be deducted.
- Employer Contributions Above the Compulsory Rate: If your employer contributes more than the mandatory amount to your super, those extra contributions can be deductible as well.
Tax Benefits:
- Contributions to your super fund are taxed at a lower rate of 15%, which is generally much less than your marginal tax rate. This can help reduce the overall impact of your higher tax rate. These benefits are available to both employees and self-employed individuals.
By taking advantage of these contributions, you can not only boost your retirement savings but also enjoy some significant tax savings!
Thinking of boosting your retirement and lowering your tax bill? Speak with ISM Accountants to structure your super contributions strategically
7. Professional Expenses & Insurance
If you wish to enhance your career, you should realise that many professional expenses can be claimed as tax deductions, resulting in significant savings.
Some deductible professional expenses you should consider:
- Income Protection Insurance Premiums: These premiums help protect your income in case you can’t work due to illness or injury, and they’re deductible.
- Professional Membership Fees: If you’re a member of a professional organisation, the fees you pay for membership can be claimed.
- Accounting and Tax Agent Fees: Any costs associated with hiring an accountant or tax agent for advice or services are deductible.
- Legal Fees: If you incur legal fees related to your work or income-earning activities, those can also be claimed.
- Professional Indemnity Insurance: This insurance is deductible and guards against allegations of malpractice or carelessness in your line of work.
You can additionally deduct charges for professional development and tax software in addition to these costs:
- Tax Preparation Software Subscriptions: If you use software to help with your tax preparation, those subscription costs are deductible.
- Professional Journals and Publications: Subscriptions to industry-related journals or publications can be claimed as well.
- Industry Conference Attendance: If you attend conferences to learn more about your field and network, those expenses can be deducted.
- Continuing Professional Development Courses: Any courses you take to enhance your skills or qualifications can also be claimed.
You may maximise your tax savings and make an investment in your professional development by monitoring these costs!
Recommended Read: Register a Trust in Australia
8. Digital Tools & Apps for Tracking Deductions (New)
In Australia, keeping accurate records of your deductions is essential for complying with the Australian Taxation Office (ATO) requirements.
Digital tools like the MyDeductions app, receipt scanning apps, and cloud accounting software such as Xero or MYOB are invaluable for this purpose. These apps help you capture and categorise expenses in line with ATO guidelines, making it easier to claim legitimate deductions.
Using these digital tools ensures your records are organised and compliant, which is crucial for audit readiness. Taxpayers should keep records for at least five years, and have digital copies of receipts and expense reports.
By leveraging these apps, Australian businesses and individuals can streamline their bookkeeping, reduce errors, and confidently prepare their tax returns while maximising eligible deductions.
9. Multiple Jobs and Income Streams (New)
Managing your deductions can seem difficult if you have multiple jobs, freelance, or make money through the gig economy, but it is definitely possible. Paystubs, invoices, and receipts for any expenses related to the job should all be kept separately for each job or source of income in Australia. In this manner, you may ensure that you take the appropriate deductions for each.
It’s crucial for independent contractors and gig workers to monitor expenses including travel, equipment, and home office fees. It can be simpler to arrange all of your earnings and outlays in one location if you use apps or other digital tools. Maintaining organisation makes it easier to follow ATO regulations stress-free, claim the deductions you are eligible for, and save time during tax season.
Perth/Australia-Specific Tax Tips
- Income Tax Rates: Australian residents pay tax on a sliding scale from 0% for income up to AUD 18,200, rising to 45% for incomes above AUD 190,000 (2025-26 rates).
- Tax-Free Threshold: Income up to AUD 18,200 is tax-free, helping low-income earners reduce tax liability.
- Common Deductions: Work-related expenses such as vehicle use, travel between work locations, protective clothing, home office costs, phone and internet used for work, self-education, and tools.
- Tax Offsets: Low Income Tax Offset (LITO) helps reduce tax for incomes below AUD 66,667; Seniors and Pensioners Tax Offset (SAPTO) offers additional relief for eligible individuals.
- Medicare Levy: 2% of taxable income funds universal healthcare; exemptions and reductions apply for low incomes and eligible seniors.
- Superannuation Contributions: Compulsory employer contributions increased to 12% from July 2025; personal contributions may be tax deductible up to certain limits.
- Record Keeping: Keep receipts and documentation of all expenses claimed for deductions to ensure compliance and maximise refunds.
- Salary Packaging: Arranging part of income as benefits (e.g., superannuation, car payments) can reduce taxable income but may have limits and exclusions.
- Filing Deadlines: Australian financial year runs July 1 to June 30; tax returns due in October, with options for later lodgment via registered tax agents.
How to Claim Tax Deductions Successfully?
Claiming tax deductions successfully requires a clear and organised approach to ensure you follow the rules while maximising your claims.
Step-by-step process to claim tax deductions:
- Identify Eligible Expenses: First of all, go through all your expenses from the year and figure out which ones are related to earning your income.
- Gather Supporting Records: Then, collect all your receipts, invoices, and any other documents that support your claims.
- Calculate Work-Related Portions: Calculate for expenses that are used for both personal and work purposes, and determine what percentage is for business use.
- Complete Your Tax Return: You can use myTax, tax software, or hire a registered tax agent to help you fill out your tax return.
- Keep Records: Hold onto all your supporting documents for five years in case you need to refer back to them.
Example Calculation:
- Your taxable income would be $75,000 if your yearly income was $5,000. This implies that if you’re in the 32.5% tax rate, you might save almost $1,625 in taxes.
Avoid these common mistakes:
- Don’t claim personal expenses as work-related.
- Inflating expense amounts without proper documentation.
- Don’t claim expenses without a sufficient connection to income.
- Poor record-keeping leads to the inability to substantiate claims.
MyTax vs Tax Agent decision:
- Use myTax if your tax affairs are straightforward with standard deductions
- Engage a tax agent for complex situations, multiple income sources, or significant deductions
Deduction Type | Individuals | Small Business |
Work-related tools | Claim proportion used for work | 100% deductible if business-only |
Home office | Fixed-rate / actual cost | Rent, utilities, equipment |
Vehicle | Work-related travel | Business fleet or mileage logbook |
Need help lodging your return? ISM Accountants can prepare and help you with tax return services, ensuring all eligible deductions are claimed correctly.
Filing Your Tax Return and Staying Compliant for Tax Deductions in Australia
It is essential to avoid scrutiny from the ATO and potential penalties. That’s why keeping proper records and reporting accurately is important.
Here’s what you need to know about record-keeping:
- What to Keep: You have to make sure to save receipts, invoices, bank statements, logbooks, and timesheets. These documents are essential for substantiating your claims.
- How Long to Keep Them: Hold onto these records for five years from the date you lodge your tax return.
- Digital Storage: You can store photos and scanned copies of your documents, as long as they are clear and complete.
When it comes to reporting, here are some guidelines to follow:
- Only claim expenses that you can back up with your records.
- Declare all your income, including any cash payments.
- Use the correct expense categories on your tax return.
- Round amounts to the nearest dollar for simplicity.
Be mindful of the penalties imposed by the ATO for non-compliance, which may include interest charges on any further taxes due, administrative fines for making false or misleading claims, and even possible prosecution for significant tax fraud.
The ATO provides helpful tools to help you keep on track, including online data sheets and instructions for certain deductions, calculators for home office and vehicle expenses, and the myDeductions app for recording spending. Using these tools will greatly simplify the process of managing your tax responsibilities!
Recommended Read: Tax Filing Deadlines in Australia
Common Tax Deduction Mistakes to Avoid in 2025/26
Accuracy is more important than ever because of the ATO’s data matching capabilities, which make typical errors easy to identify.
Inflated work-related expense claims:
- The ATO benchmarks expense claims against industry averages
- Claims significantly above average trigger review
- Always claim only the genuine work-related portion
Home office deduction errors:
- Claiming expenses when occasionally working from home as an employee
- Using outdated rates or methods
- Poor documentation of hours worked from home
- Claiming private use of home office spaces
Undeclared income impacts:
- Gig economy payments through platforms like Uber, Airtasker
- Cash payments and tips
- Investment income, including cryptocurrency gains
- Rental income from sharing economy platforms
Other ATO-flagged issues:
- Claiming the same expense in multiple categories
- Excessive travel expense claims without proper documentation
- Claiming expenses for income not earned (e.g., claiming rental expenses when the property was vacant)
Worried about other taxation services? Our accountants will review your claims before you lodge to ensure accuracy and peace of mind.
Organising Your Tax Deductions in Australia – Practical Tips
Effective organisation throughout the year makes tax time much easier and ensures you don’t miss legitimate deductions.
Receipt management strategies:
- Photograph receipts quickly to avoid loss or fading.
- Use cloud storage with automated backups.
- Sort by category (job, investment, charity, etc.).
- Note the business purpose on receipts for mixed spending.
Digital record-keeping tools:
- MyDeductions app: ATO’s free spending tracking app.
- Receipt scanning applications: Automate data entry and categorisation.
- Accounting Software for Business Owners and Investors
- Spreadsheet Templates: Simple tracking for basic circumstances.
Year-Round Preparation Tips
- Automatic Bank Categorisation: You should set up automatic categorisation for your recurring expenses in your bank account. This will help you track your spending without the hassle of manual entry.
- Quarterly Reviews: Schedule quarterly reviews of your expenses and records. This will allow you to catch any discrepancies early and keep your finances organised.
- Separate Accounts: Use separate credit cards or bank accounts for your business expenses. This makes it easier to track your business-related spending and simplifies your record-keeping.
- Logbook Maintenance: Keep a simple logbook for tracking your vehicle and home office use. This will help you accurately claim deductions related to these expenses.
Audit Preparation
- Accessible Records: Keep your records in formats that are easy to access. This will save you time and stress if you need to retrieve documents quickly.
- Clear Explanations: Maintain clear explanations for any commercial purposes related to your expenses. This will help clarify your claims if questioned.
- Supporting Documents: Always keep supporting documents, such as contracts and agreements, to back up your claims. These can be crucial during an audit.
- Regular Backups: Regularly back up your digital records to avoid any loss. This ensures that you have copies of important documents in case of technical issues.
Small Business & Sole Trader Tax Deductions
- Office rent, utilities, and insurance
- Business-related motor vehicle costs
- Tools, software, and equipment depreciation
- Marketing, website, and advertising expenses
- Professional services (accounting, legal)
Running a small business or working as a sole trader? ISM Accountants can optimise your business structure and maximise deductions while ensuring compliance.
Year-End Tax Planning Tips
As the financial year wraps up, it’s the perfect time for businesses and individuals to review their finances and implement strategies to reduce their tax liability. Ensure all your expense records and receipts are up to date and properly organised to maximise your deductible claims.
To receive tax benefits, think about prepaying certain business expenses or making extra superannuation payments before June 30. By doing a thorough assessment now, you might find ways to maximise your tax position and steer clear of unpleasant surprises later on. Speaking with your accountant might yield personalised guidance to match your financial objectives with your tax planning.
Recommended Read: Australian Tax Law
Common Red Flags and Audit Triggers
Accounting firms that provide client advice should be aware of potential red flags that could lead to an ATO audit. These include irregular income reporting, excessive deductions in comparison to income, and inadequate claim support paperwork.
Frequent large cash transactions, discrepancies between reported income and third-party data, and excessive claims for work-related expenses without evidence are also common triggers. Encouraging clients to maintain accurate, organised records and submit honest, well-supported tax returns can minimise audit risks and ensure compliance with ATO requirements.
Final Thoughts – Maximise Your Tax Refund with Confidence
Tax deductions help you lower your tax bill while following ATO rules. To make the most of them, know what you can claim, keep good records, and report everything accurately.
For the 2025/26 tax year, focus on valid work-related expenses, use correct methods for home office and vehicle claims, and track your records all year. Consider getting professional tax advice for tricky situations.
Make a plan by keeping an eye out for deduction opportunities before the fiscal year ends, planning your expenses carefully, and, if you make a lot of money, considering superannuation payments.
Always put compliance and accuracy first. Ask the ISM accountant for advice if you’re not sure. To prevent ATO problems and confidently claim deductions, stay organised and educated.
This tax season, be sure you don’t lose any money. To be sure you’re taking advantage of all available deductions and maximising your tax savings, get in touch with ISM Accountants right now!
FAQs – Quick Answers to Common Tax Deduction Questions
If you work from home occasionally as an employee, you generally cannot claim home office expenses. But self-employed individuals may be eligible for deductions related to their home office.
Keep records of all expenses related to your home office, including utility bills, internet costs, and any supplies purchased for work.
Yes, charitable donations are generally deductible, with limits based on your adjusted gross income.
Superannuation contributions reduce your taxable income, potentially lowering your overall tax liability.
You can claim expenses directly related to your work, such as travel, supplies, and certain home office costs if self-employed.
Yes, self-education expenses are deductible if they maintain or improve skills related to your current job.
Yes, you can deduct accountant fees and tax software costs as work-related expenses.
Yes, gig workers(Uber, Deliveroo, Airasteer) can claim various work-related expenses like vehicle costs, fuel, insurance, and mobile phone expenses used for their work. He/she should keep detailed records and receipts to substantiate these claims.
If the ATO audits your deductions, they will review your claims for accuracy and may request supporting documentation. Depending on their findings, you may need to pay additional tax, penalties, or interest if discrepancies are identified.
You can claim pet expenses, such as for guard dogs, if they are directly related to your work activities. However, you can only claim the portion of expenses that pertains to your work, not personal use.
The most common ATO red flags for dedcuctions are high claims compared to your income, claiming personal expenses as deductions, and inconsistencies between reported income and claimed expenses. Additionally, a lack of proper documentation can also trigger scrutiny from the ATO.
