The Small Business Owner's Guide to Tax Deductions for the 2025/26 Financial Year

As a small business owner in Australia, you know that every dollar counts. At tax time, one of the most powerful tools you have to improve your bottom line is a thorough understanding of the tax deductions available to you. Claiming everything you're entitled to can significantly reduce your tax liability and free up capital to reinvest in your business.

But with tax laws constantly evolving, how can you be sure you're not missing out?

This guide will walk you through the essential tax deductions for Australian small businesses for the 2025/26 financial year. Let's make sure you're claiming every last dollar.

1. The Instant Asset Write-Off: Your Best Friend for Growth

The instant asset write-off remains a valuable tax break for eligible businesses. It allows you to immediately deduct the full cost of qualifying assets, rather than depreciating them over several years.

• What is the current threshold? For the 2025/26 financial year, the threshold is $20,000.

• Who is eligible? Businesses with an aggregated annual turnover of less than $10 million.

• What can you claim? New or second-hand assets used for your business, such as:

  • Computers, laptops, and printers

  • Office furniture (desks, chairs)

  • Tools of the trade (for tradies, designers, etc.)

  • Point-of-sale systems and other business equipment

Pro Tip: Remember the asset must be installed and ready for use by 30 June 2026 to be claimed in this financial year.

2. Vehicle and Motor Expenses: Keeping Your Business Moving

If you use a car for your business, you can claim a significant portion of its running costs. The two main methods for claiming are:

• Cents per Kilometre Method:

  • Simple and requires less record-keeping.

  • You can claim a set rate per kilometre (check the ATO for the current rate) for up to 5,000 business kilometres.

  • You don't need written evidence to show exactly how many kilometres you travelled, but you do need to be able to show how you worked out your business kilometres (e.g., a diary of work-related trips).

• Logbook Method:

  • Requires detailed records but often results in a larger claim.

  • You must keep a logbook for 12 continuous weeks to determine the business-use percentage of the vehicle.

  • You can then claim that percentage of all your car's running costs, including fuel, insurance, registration, servicing, and depreciation.

3. Home Office Expenses: The New Reality of Work

With more people running businesses from home, it's crucial to claim these expenses correctly.

• Running Expenses: You can claim the work-related portion of costs like:

  • Electricity and gas for heating, cooling, and lighting.

  • Internet and phone bills.

  • Stationery and computer consumables (ink, paper).

• Claiming Methods: You can use the ATO's revised fixed-rate method (a set rate per hour you work from home) or the actual cost method, which requires detailed records of all expenses.

Important Note: You generally can't claim occupancy expenses like rent, mortgage interest, or council rates unless your home is your primary place of business and a specific area is set aside exclusively for your work.

4. Don't Forget These Other Common Deductions:

• Operating Expenses: Day-to-day costs like rent for your premises, utility bills, and staff wages.

• Professional Development: The cost of courses, seminars, and subscriptions that improve your skills or knowledge in your field.

• Superannuation Contributions: Contributions you make to your employees' super funds are deductible. Contributions to your own super fund may also be deductible.

• Professional Fees: This includes payments to your accountant (like us!), lawyers, or other business advisors.

Maximise Your Return with Expert Help

Navigating the world of tax deductions can be complex, and the rules can change. While this guide covers the basics, a qualified accountant can offer personalised advice tailored to your specific business and industry, ensuring you are both compliant and maximising your claims.

Don't leave money on the table this financial year. Get in touch with the experts at LKC Accountants today to review your deductions and create a tax strategy that supports your business goals.

Contact us for a no-obligation chat and let's get your business tax-ready!