5 Common Tax Deductions Business Owners Miss (Australia)

Key Takeaways

You can claim a deduction for expenses prepaid for the next 12 months.
Bad Debts must be physically written off before June 30 to be deductible.
Home office claims differ significantly for Sole Traders vs. Companies.

Every dollar you legitimately claim as a tax deduction is a dollar that stays in your business rather than going to the ATO. Yet, every year, thousands of Australian small business owners overpay their tax simply because they don't know what they are entitled to claim.

While most owners remember to claim rent and wages, there are several "hidden" deductions that often slip through the cracks. Missing these can effectively lower your net profit margin.

Here are the top 5 tax deductions we see businesses miss most often.

1. Prepaid Expenses

This is one of the most powerful cash-flow strategies for small businesses (turnover under $50 million). The ATO allows you to claim an immediate deduction for certain expenses you pay in advance, provided the service period is 12 months or less.

Example: If you pay your $2,400 annual business insurance premium in June 2026 (for the year ahead), you can claim the full $2,400 in your 2025–2026 tax return, reducing your tax bill for the current year.

2. Bad Debts (The "Write-Off" Rule)

If a client hasn't paid you and it’s clear they never will, you can claim that lost income as a tax deduction—but there is a catch regarding the timing.

⚠️ The Golden Rule of Bad Debts:

You cannot simply "decide" a debt is bad after the financial year ends. To be deductible, the debt must be physically written off from your debtors ledger before June 30. If you wait until July 1, the deduction moves to the next financial year.

3. Home Office Expenses

Since the hybrid working boom, the ATO has been scrutinizing home office claims. Many business owners miss out because they use the "Fixed Rate" method (67 cents per hour) when the "Actual Cost" method might yield a higher deduction, or vice versa.

It is important to distinguish between:

Running Expenses: Electricity, heating, internet (Deductible portion).
Occupancy Expenses: Rent, mortgage interest, rates (Usually only deductible if you have a dedicated business area and no other workplace).

4. Digital Subscriptions & Software

In the age of SaaS (Software as a Service), it's easy to lose track of small monthly subscriptions. These add up significantly.

Ensure you are claiming:

Cloud storage (Dropbox, Google Drive)
Design tools (Canva, Adobe)
Project management tools (Asana, Trello)
Your accounting software fees (Xero, MYOB, QuickBooks)

5. Superannuation (Timing is Everything)

Superannuation is deductible, but only when it is paid and received by the fund, not just when it is accrued in your payroll software.

Scenario	Tax Consequence
Paid on June 30	Funds may not clear until July. Deduction moves to next year.
Paid on June 20	Funds clear before year-end. Deduction allowed in current year.
Paid Late	SGC Statement required. Payment is Non-Tax Deductible.

Don't Leave Money on the Table

Tax laws change frequently, and keeping up with every possible deduction is a full-time job. That is why we are here.

Tip: The "Shoebox" is Dead

The ATO no longer accepts "I lost the receipt" as an excuse. We recommend using apps like Dext or Hubdoc to snap photos of receipts immediately. If there is no digital trail, the deduction is often disallowed.

Want a Second Pair of Eyes?

We review prior tax returns to see if you missed valuable deductions. Let's optimize your tax position today.

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Disclaimer: This article provides general information only. Tax laws are complex and subject to change. Please consult a registered tax agent at PrepMyBook for advice specific to your business structure.