Content reviewed and verified by Graham Chee, with FCPA-led practice at Local Knowledge, Mascot NSW. Continuous CPA Australia member since 1986. Prior career at Goldman Sachs, BNP Investment Management and Merrill Lynch..
TL;DR
Claiming what you are genuinely entitled to — and substantiating it properly — is where real money is won or lost. Here is a practical guide grounded in ATO rules.
Key Takeaways
- Home office running costs for genuine business use — using a defensible, documented method.
- Motor vehicle expenses for business travel, supported by a logbook.
- Depreciation of equipment and, where eligible, the instant asset write-off for the relevant year.
- Accounting, bookkeeping and business advisory fees.
- Business-related interest, bank fees and merchant fees.
The rule behind every deduction
Almost every business deduction comes back to one test: was the expense incurred in gaining or producing your assessable income? If the answer is genuinely yes, and it is not private, capital or specifically excluded, it is generally deductible — provided you can substantiate it. That last word does most of the work. The ATO does not disallow claims because they were unreasonable; it disallows them because the taxpayer could not prove them.
So the two disciplines that matter are: understanding what actually qualifies, and keeping records good enough to stand behind it. Get both right and you claim everything you are entitled to with confidence. Get the records wrong and even legitimate expenses become a fight you will lose.
Commonly missed legitimate deductions
Home office running costs for genuine business use — using a defensible, documented method.
Motor vehicle expenses for business travel, supported by a logbook.
Depreciation of equipment and, where eligible, the instant asset write-off for the relevant year.
Accounting, bookkeeping and business advisory fees.
Business-related interest, bank fees and merchant fees.
Superannuation contributions for eligible employees and, where applicable, yourself.
Professional development, subscriptions and industry memberships tied to the business.
Bad debts genuinely written off before year end.
Where owners get into trouble
The claims that attract ATO attention are rarely exotic. They are the everyday ones pushed too far: private use dressed up as business (the family car, the “home office” that is really the lounge room), entertainment claimed as though it were a normal expense when it is generally non-deductible and can trigger fringe benefits tax, and drawings from a company treated as though they were wages. Division 7A is a particular trap — money taken out of a private company by its owners must be a proper wage, a franked dividend, or a complying loan, or it can be taxed as an unfranked deemed dividend.
Our job is to make sure you claim boldly where you are entitled and conservatively where the line is genuinely grey — and that the file explains every position. That is what keeps a review short.
Worked example
A Sydney consultant was claiming 90% business use on a vehicle with no logbook, and running personal software subscriptions and some family travel through the business. We rebuilt the position: a proper logbook supported a defensible 70% business-use claim, genuinely deductible subscriptions were retained, and the private items were removed. The net result was a slightly lower vehicle claim but a dramatically stronger file — and when the ATO later issued a routine query, it was resolved with a single email because the substantiation was already there. A defensible 70% is worth far more than an indefensible 90%.
"A deduction you cannot substantiate is a liability, not a saving."
Frequently asked questions
Q.Can I claim my home office?
You can claim the running costs attributable to genuine business use of your home, using an accepted method and keeping the records that method requires. Occupancy costs (like a portion of rent or mortgage interest) are more complex and can affect the CGT status of your home, so get advice first.
Q.Is business entertainment deductible?
Generally no. Most meal and entertainment expenses are non-deductible and can attract fringe benefits tax if provided to employees. There are narrow exceptions, and the treatment depends on the circumstances.
Q.How long do I need to keep records?
Generally five years from when you lodge, and longer for records relating to assets you still hold (for CGT). Keep them in a form you could actually produce if asked.
Q.Can I claim an asset I bought at year end?
Potentially, via depreciation or the instant asset write-off if eligible — but the asset generally needs to be installed and ready for use, not just paid for. Confirm the threshold and dates for the relevant year.
Q.What happens if the ATO reviews me?
If your positions are correct and substantiated, a review is an inconvenience, not a crisis. That is precisely why we build the file to answer questions before they are asked.
References
References
- ATO — Deductions for business — Australian Taxation Office
- ATO — Motor vehicle and logbook requirements — Australian Taxation Office
- ATO — Division 7A private company loans — Australian Taxation Office
- ATO — Record keeping for business — Australian Taxation Office
About the Author
Graham Chee, FCPA, CPA, GRCP, GRCA
Principal and Founder, Local Knowledge
Graham Chee is the principal and founder of Local Knowledge, an FCPA-led Australian practice that brings institutional-grade compliance, investment-structure and intellectual-property experience directly to owner-managed businesses. Graham is a Fellow of CPA Australia (FCPA since November 2005, continuous CPA member since 1986) and holds the OCEG Governance, Risk & Compliance Professional (GRCP) and Governance, Risk & Compliance Auditor (GRCA) designations. His prior career includes senior roles at Goldman Sachs, BNP Investment Management and Merrill Lynch. Graham was previously portfolio manager of the Asian Masters Fund (IPO December 2007 – 31 December 2009), which returned +29% in AUD terms versus the MSCI Asia Pacific (ex Japan) benchmark. He signs off on 100% of client files personally.
Areas of Expertise:
Speak with our principal
This article provides general information only and does not constitute financial, legal, or tax advice. Speak with our principal for advice specific to your circumstances. Every file is signed off by our principal under the CPA Code of Ethics.
Graham Chee FCPA, CPA, GRCP, GRCA · Principal, Local Knowledge · Mascot NSW · CPA-signed files