Can I claim that? SME tax deductions 2026

Every tax season, small business owners ask the same question: “Can I actually claim that?” The good news is that many business expenses are legitimately deductible. The challenge is understanding where the Australian Taxation Office (ATO) draws the line between business and personal use. For SMEs, getting this wrong can mean missed deductions or unwanted ATO attention.

In this article, I outline some of the more common tax deduction questions I hear from business owners and endeavour to answer questions to help you understand what you can and can’t claim this financial year.

The short answer is yes, but only the business-related portion. If you use your vehicle to visit clients, travel between job sites, pick up supplies, or attend meetings, those trips are generally deductible. Commuting from home to your normal workplace is usually not claimable.

There are two common methods:

• Cents per kilometre method
• Logbook method

For many SMEs, the logbook method delivers a larger deduction because it allows you to claim a percentage of fuel, registration, insurance, servicing, and depreciation. The key is keeping proper records.

With hybrid work now standard for many business owners, home office deductions remain highly relevant in 2026. If you run your business from home, you may be able to claim:

• Electricity and the internet
• Phone usage
• Office furniture
• Computer equipment
• Software subscriptions

The ATO’s fixed-rate method currently allows eligible taxpayers to claim a set hourly rate for running costs, provided accurate records are kept. However, claiming occupancy costs such as rent or mortgage interest can affect your capital gains tax exemption when selling your home, so professional advice is important before claiming these expenses.

In many cases, yes. Eligible small businesses with a turnover under $10 million may still access the instant asset write-off for assets under the current threshold limits. For the 2025–26 financial year, eligible assets valued at less than $20,000 may qualify if they are installed and ready for use before 30 June 2026. This can include:

• Laptops and computers
• Tools and machinery
• Office furniture
• POS systems
• Business technology

Assets above the threshold are generally depreciated over time instead.

This is where many business owners get confused. A client lunch or coffee meeting may feel business-related, but entertainment expenses are often not deductible. In many situations, meals, drinks, and hospitality expenses are subject to entertainment rules and cannot be claimed. There are exceptions, particularly where fringe benefits tax (FBT) applies or where meals are part of travel. But in general, claiming every café receipt is risky. If you’re unsure, ask your accountant before lodging your return.

Clothing is another common question, and you can usually only claim it if it is genuinely work-related. Items such as

• Protective clothing
• Branded uniforms
• Industry-specific safety gear

But conventional clothing, even if you only wear it for work, is typically not deductible. For example, a black suit, business dress, or regular shoes generally won’t qualify.

Most business-related subscriptions are deductible. Common claims include:

• Accounting software
• Microsoft 365
• Adobe subscriptions
• Industry memberships
• Website hosting
• Cloud storage
• CRM platforms

As long as the expense directly relates to earning business income, it is generally claimable.

Travel is a big-ticket item for many SMEs, and business travel is usually deductible if the trip is genuinely for work purposes.

This can include:

• Flights
• Accommodation
• Taxi or rideshare fares
• Meals while travelling overnight

However, mixing personal holidays with business trips creates complications. If part of the trip is private, expenses must be apportioned appropriately. The ATO pays close attention to “work trips” that look more like holidays.

Without doubt, poor record-keeping is the single biggest challenge to SMEs. The ATO’s “golden rules” are simple:

• The expense must relate to earning business income
• You must be able to prove it
• You can only claim the business-use portion

Too many businesses rely solely on bank statements. That’s not enough in an audit. Keeping digital receipts, maintaining logbooks, and separating business and personal expenses is highly recommended.

Legitimate tax deductions can reduce your tax bill, and you’re entitled to them; however, they must be claimed correctly. The safest approach is to focus on deductions directly related to running your business and supported by accurate records.

If you’re asking yourself, “Can I claim that?”, the answer is often “maybe”, and that’s exactly why proactive and experienced tax advice matters.

North Advisory, located on Sydney’s Northern Beaches, is ideally positioned to assist you with expert financial management, taxation planning, and the implementation of economic strategies.

Marius Fourie, Director and Accountant, is a leading business accountant and advisor who has helped many Australian businesses maximise their financial position.

Contact Marius today and secure your financial future.