Tax Deductions Freelancers Forget to Claim in Australia
Freelancing gives you flexibility, but it also means keeping track of your own tax. This is where small expenses can easily slip through.
A software subscription, part of your internet bill, a training course or a few client-related trips might not seem like much on their own. Over a full financial year, though, they can add up.
As a general rule, you can claim business expenses that are directly related to earning your assessable income. If something is partly for business and partly private, you generally need to separate the private portion and claim only the business use.
1. Working From Home
If your spare room, dining table or home office doubles as your workplace, you may have home-based business expenses you can claim.
Depending on your circumstances and the method used, this can include costs such as electricity, phone, internet and other running expenses. The important part is determining the eligible business amount and maintaining the records needed to support it.
A common mistake is assuming there is nothing to claim simply because you would be paying for internet or electricity anyway.
2. Phone and Internet
Freelancers often use the same phone and internet connection for both work and personal use. Client calls, Zoom meetings, emails, research and sending work to clients can all form part of your business use.
That does not mean the whole bill is automatically deductible. If there is private use as well, you need to work out and claim the business-related portion.
3. Software and Subscriptions
This is one of the easiest categories to forget because so many payments come out automatically each month.
Think about:
Adobe Creative Cloud
Canva
Microsoft 365
cloud storage
accounting software
project management tools
CRM platforms
website hosting
other software used for your freelance work
The ATO allows deductions for digital products used in running a business. Subscription software fees can generally be deducted in the year they are incurred where they relate to the business.
That $20 or $50 monthly subscription might not seem significant, but several subscriptions over 12 months can add up to a decent business expense.
4. Computers, Equipment and Tech
Bought a laptop, monitor, camera, microphone or other equipment for your freelance work?
These costs may also be deductible, but how you claim them depends on the item, its cost, how much it is used for business and the depreciation rules that apply. Some eligible assets may qualify for an immediate deduction, while others need to be claimed over time.
So, rather than assuming a new laptop can simply be written off in full, keep the invoice and ensure the correct tax treatment is applied.
5. Accounting and Bookkeeping Fees
This one is easy to miss because you may only pay these costs once or a few times a year.
Eligible costs of managing your tax affairs, including fees paid to a registered tax agent, can be deductible. Accounting and bookkeeping expenses associated with running your business may also be considered part of your business expenses.
Keep those invoices instead of forgetting about them once your return has been lodged.
6. Training and Professional Development
Paid for a course, seminar or conference during the year? It may be worth checking at tax time.
Training that maintains or improves skills connected with your current income-earning activities may be deductible in the right circumstances. The rules are different where the study is designed to qualify you for a new profession or a completely different type of work.
For example, a freelance designer completing advanced training in software they already use for client work is very different from paying for a course to move into an unrelated career.
7. Business Travel and Vehicle Costs
Driving to meet a client, travelling between business locations or paying parking and tolls for a business-related trip can easily slip through the cracks.
Business owners may be able to claim motor vehicle and travel expenses that relate to running their business. However, the method used and the records you keep matter, and private travel cannot simply be included.
If you regularly drive for freelance work, keeping records throughout the year is much easier than trying to remember every trip at tax time.
8. Bank Fees, Payment Charges and Insurance
Small charges often disappear into the background.
Business bank fees, merchant charges and payment-processing fees may be deductible where they relate to running the business. The same may apply to business-related insurance, such as professional indemnity or public liability cover, depending on your circumstances.
A Simple Example
Arya is a freelance graphic designer who earns $85,000 from her business for the year.
She remembers her new computer when preparing her tax records, but then finds several other expenses she had almost forgotten about:
$2,100 in design software and cloud subscriptions
$900 of eligible business-related phone and internet costs
$750 in accounting and bookkeeping fees
$850 for relevant professional training
$1,300 of eligible home-office running expenses
That is $5,900 of expenses that may otherwise have been missed.
But Arya does not simply get $5,900 back.
A tax deduction generally reduces the amount of income that is subject to tax; it is not a dollar-for-dollar refund. Arya's actual tax outcome will depend on her overall income, deductions and circumstances.
The Real Issue Is Often Record Keeping
Most freelancers remember the big purchase. What gets missed are the smaller costs spread across the year: subscriptions, phone use, professional fees, training, payment charges and business travel.
Keeping good records makes it much easier to identify legitimate tax deductions for freelancers without guessing, missing expenses or claiming something you are not entitled to.
At Clear Tax, we help freelancers, contractors and sole traders understand their tax position, organise their deductions and prepare their tax returns correctly.
Not sure whether you are claiming everything you're legitimately entitled to? Speak with the Clear Tax team today and make sure genuine business expenses are not being left out at tax time.
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