The tax changes that could save your business money? They’re often the ones you don’t have time to keep up with. But in 2025, staying informed matters more than ever. With a bumpy economy and changes to policies like the instant asset write-off and deduction limits, understanding what you can claim and how to maximise your tax deductions could make a real difference to your business.

This guide, with expert advice from Chartered Accountant James Scott, Director at JD Scott + Co, breaks down the most valuable small business tax deductions for 2025. We’ll cover what’s claimable, what’s commonly missed, and what’s new this year.

Understanding small business tax deductions

Tax deductions let you subtract certain business expenses from your total income, reducing the amount of tax you need to pay. That means every deductible dollar could lower your tax bill and free up funds to reinvest in your business.

Take, for example, a café owner who invests in a new $5,000 coffee machine. If it’s used entirely for business purposes, that cost can be claimed as a deduction, lowering the café’s taxable income and reducing the overall tax bill. That’s money that can stay in the business and be used for day-to-day operations or future upgrades.

To make the most of your deductions, it’s important to understand what qualifies as a legitimate business expense and how to track and report it correctly.

What small businesses can claim on tax in 2025

There are many common business expenses you can claim on tax, but they must meet ATO criteria. The expense must be:

  • Directly related to earning your income
  • Only for business use (or split between business and personal use)
  • Properly documented with receipts or records

Here’s a breakdown of key claimable categories, along with what to watch out for.

Operating expenses

These are day-to-day costs of running your business, such as:

  • Rent or lease payments for business premises
  • Utilities like electricity, gas, internet and phone
  • Staff wages and super
  • Professional services like accounting or legal support
  • Office supplies and subscriptions

Keep in mind:

  • You can’t claim personal expenses or any part of a cost not used for business. For shared services (like internet), only the business portion is deductible.
  • Client entertainment and social events are generally not deductible, even if work-related.

As Scott explains, “It’s a bit of a grey area. While client entertainment usually isn’t deductible or subject to Fringe Benefits Tax (FBT), entertainment involving employees can be, especially if it’s a team lunch or social event that’s not directly tied to earning income.”

If you need help keeping your expenses in check, take a look at our small business cash flow forecasting guide.

Work-related travel and vehicle costs

You can claim expenses for work trips or business-related vehicle use, including:

  • Flights, accommodation and meals for business travel
  • Car fuel, servicing, registration and depreciation
  • Tolls and parking

What you’ll need: Clear records and written evidence. For vehicles, you’ll also need a logbook or odometer readings if you’re claiming based on usage.

And remember: if the vehicle is used for both business and personal reasons, Fringe Benefits Tax (FBT) could apply. This usually only happens if the vehicle is provided to an employee or the business operates through a company or trust structure.

Equipment and technology

Business-related tools, machinery and tech may be deductible. Depending on the cost, you can:

  • Claim the full amount immediately (if eligible under the instant asset write-off)
  • Or spread the claim over several years through depreciation

Remember: Mixed-use items like phones or computers should be split based on how much they’re used for business.

Professional development

Training is deductible if it helps maintain or improve skills for your current business activities. You can claim:

  • Relevant courses, certifications or workshops
  • Online learning platforms
  • Conferences related to your industry

You can’t claim: Training that prepares you for a new job or a different business field.

Insurance and superannuation

Claimable expenses include:

  • Business insurance (like public liability or professional indemnity)
  • Super contributions made on time for employees.

Heads-up: To be deductible, super contributions must be received by the fund before 30 June, not just paid. That means business owners should allow at least a week for processing. With 30 June falling on a Monday this year, it’s best to make the payment well in advance to ensure it’s received on time.

A note on capital expenses: Some capital expenses, like major improvements to your business premises or certain high-value equipment, usually need to be depreciated over time rather than claimed in full upfront. However, many start-up costs and eligible assets may still be deductible, including under the instant asset write-off if the criteria are met.

The $20,000 instant asset write-off: What you need to know

The instant asset write-off allows eligible small businesses to immediately deduct the full cost of assets costing less than $20,000. This measure has been extended until 30 June 2025, giving you the chance to reduce your taxable income and invest in your business.

Who is eligible?

Your business must:

  • Have an aggregated turnover of less than $10 million
  • Acquire and use the asset between 1 July 2023 and 30 June 2025

What can you claim?

The asset must be used mainly for business purposes and be depreciating under ATO rules. Examples include:

  • Tools, equipment and machinery
  • Laptops, mobile phones and other tech
  • Office furniture and fittings
  • Vehicles (if under the $20,000 threshold and meeting business-use criteria)

The $20,000 threshold applies per asset, so you can claim multiple assets — provided each costs less than $20,000.

How to claim it

  • The asset must be installed and ready for use by 30 June 2025
  • Use the simplified depreciation rules for small businesses
  • Keep clear documentation of the asset’s cost, purchase date and business use

For the latest updates and full eligibility details, see the official ATO guide.

Deductions for home-based businesses and sole traders

If you run your business from home, either full-time or part-time, you may be able to claim a portion of your household expenses as tax deductions. This can include electricity, internet, rent or mortgage interest, and office supplies.

What you can claim

There are two main types of expenses:

  1. Occupancy expenses (for businesses with a dedicated work area), such as:
  • Rent or mortgage interest
  • Council rates
  • Home insurance
  1. Running expenses (for businesses with or without a dedicated work area), including:
  • Electricity and gas
  • Internet and phone
  • Office supplies and cleaning
  • Depreciation on home office equipment

How to work out your claim

You can use either the actual cost method or the fixed rate method.

  • The actual cost method requires detailed records for each expense, along with a floor plan showing the business-use area.
  • The fixed rate method lets you claim 67 cents per hour for electricity, internet, phone, and home office depreciation. You’ll need to keep a log of your working hours to use this method.

If you’re a sole trader, you must split shared expenses based on how much they are used for business compared to personal use.

What you can’t claim

  • Personal expenses
  • The full cost of a shared room without adjusting for business use
  • Occupancy expenses if you do not have a clearly defined, exclusive business area

Watch out: If you own your home and use the actual cost method, you may also trigger a Capital Gains Tax (CGT) event when you sell. It’s best to check with your accountant before claiming occupancy costs.

Preparing for tax time

The more organized your records are, the easier tax time will be, whether you’re working with an accountant or managing it yourself. Start by making sure your financial statements, invoices and receipts are up to date and clearly labeled. A well-kept digital record can save hours and help ensure you don’t miss valuable deductions.

If you’re handling your taxes in-house, accounting software like Xero or QuickBooks can help track expenses, automate invoicing and categorize transactions. If you’re working with a tax professional, share your documentation early so they can identify opportunities you might overlook.

ATO rules change frequently, so it’s worth checking for any updates ahead of time. Being prepared helps reduce stress and avoid common mistakes, such as misreporting expenses or missing key deadlines that could trigger an audit.

Heads-up for next year: From 1 July 2025, businesses will no longer be able to claim a deduction for General Interest Charges (GIC) applied by the ATO. As Scott explains, “This change increases the real cost of late payments. The effective interest rate will feel a lot higher when you can’t deduct it.”

If you’re using ATO payment plans to manage cash flow, it’s worth comparing the real cost, especially after this change, with other funding options like a Prospa Business Loan. These may offer more flexibility and clearer terms.

Key tax deadlines for Australian small businesses in 2025

Staying across important deadlines can help you avoid penalties and make the most of your tax deductions. Here are a few to keep on your radar:

  • 30 June 2025 – End of the 2024-25 financial year and the final date to use the $20,000 instant asset write-off
  • 28 July 2025 – Deadline for quarterly Super Guarantee contributions (Q4)
  • 21 July 2025 – Monthly BAS due (if your business is registered for GST and reports monthly)
  • 28 July 2025 – Quarterly BAS due for Q4 (if your business is registered for GST and reports quarterly)

If you’re using a registered tax agent, your tax return for the 2025 financial year may not be due until May 2026. Exact deadlines can vary depending on your structure, lodgment method and whether you have any overdue returns, so it’s best to check with your accountant or the ATO.