The tax changes that could save your business money? They’re often the ones you don’t have time to keep up with. For the 2025-26 financial year, there are a few shifts worth knowing about, from new compliance obligations to the instant asset write-off changes.

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 the 2025-26 financial year. We’ll cover what’s claimable, what’s commonly missed, and what’s changed since last 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’s changed for 2025-26

Before diving into what you can claim, it’s worth flagging a few changes that could affect how you approach this year’s return.

The $20,000 instant asset write-off is now permanent. After three years of last-minute extensions, the May 2026 budget confirmed the $20,000 threshold is here to stay. That means you can plan purchases with certainty. But to claim the deduction in this financial year, assets still need to be first used or installed ready for use before 30 June 2026.

Payday Super starts 1 July 2026. Currently, employers must pay super quarterly. From 1 July, super must be paid at the same time as wages. That won’t change what you can claim this financial year, but it will change how you manage cash flow from next year onward. Here’s how to prepare your business.

New AML obligations may change how your advisors work with you. From 1 July 2026, accountants, lawyers and real estate agents come under new anti-money laundering laws. You may notice your advisors asking more questions about your identity and business structure. It won’t affect your deductions, but it’s worth being prepared. Here’s what the new AML laws mean for your business.

Loss carry back returns. From 2026-27, eligible companies that make a tax loss can carry it back against tax paid in the prior two years and receive a refund. The budget gave a practical example: a small restaurant that purchases $65,000 in equipment (each piece under $20,000) can use the instant asset write-off to create a $15,000 loss, then carry that loss back for a $3,750 refund. Up to 85,000 companies, mostly small businesses, are expected to benefit.

For a fuller picture of compliance changes landing this year, see The 2026 compliance changes many SME owners are missing.

What small businesses can claim on tax in 2026

There are many common business expenses you can claim, 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 the main claimable categories, along with what to watch out for.

1. Operating expenses

These are the day-to-day costs of running your business. You can typically claim rent or lease payments for business premises, utilities like electricity, gas, internet and phone, staff wages and super, professional services such as accounting or legal support, and 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.

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, and 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.

3. 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. The $20,000 write-off threshold applies per asset, so you can claim multiple purchases provided each costs less than $20,000 and is used or installed ready for use before 30 June 2026.

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

4. Professional development

Training is deductible if it helps maintain or improve skills for your current business activities. This includes relevant courses, certifications or workshops, online learning platforms, and conferences related to your industry.

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

5. Insurance and superannuation

Claimable expenses include business insurance (like public liability or professional indemnity) and super contributions made on time for employees.

Heads-up: To be deductible, super contributions must be received by the fund before 30 June 2026, not just paid. The Super Guarantee rate for 2025-26 is 12% of ordinary time earnings. Allow at least two weeks for processing to make sure your contributions land in time. With 30 June falling on a Tuesday this year, it’s best to make the payment well in advance.

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 in the year they’re incurred.

6. Home office and home-based business deductions

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. Occupancy expenses (for businesses with a dedicated work area) include rent or mortgage interest, council rates, and home insurance. Running expenses (for businesses with or without a dedicated work area) include electricity and gas, internet and phone, office supplies and cleaning, and 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 70 cents per hour for running costs like electricity, gas, internet, phone and stationery. Depreciation on home office equipment can be claimed separately on top of this. 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, and 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 organised 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 labelled. 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 categorise 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.

For a step-by-step walkthrough of everything you should be ticking off before 30 June, see our EOFY checklist.

A note on General Interest Charges: From 1 July 2025, businesses can no longer 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 with other funding options like a Prospa Line of Credit, which may offer more flexibility and clearer terms. If you’re weighing up whether to borrow before or after 30 June, our EOFY business loan guide can help you think through the timing.

Key tax deadlines for the 2025-26 financial year

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

  • 30 June 2026 – End of the 2025-26 financial year and the last date to claim the $20,000 instant asset write-off for this financial year
  • 31 October 2026 – Tax return deadline if you’re self-lodging
  • 15 May 2027 – Extended deadline if using a registered tax agent

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.