What Can I Claim on Tax in Australia: Your 2026 Guide

You can usually claim a tax deduction in Australia for expenses that are directly connected to earning your assessable income, as long as they aren't private or domestic and you keep proper records. Some rules are especially clear-cut, including the over $2 threshold for deductible gifts to a deductible gift recipient and the AUD 18,200 resident tax-free threshold that sits underneath how deductions affect taxable income.

That sounds simple until a real tax return is sitting open and the practical questions start. A hybrid worker wants to know if internet can be claimed. A nurse asks about shoes and laundry. A sole trader has phone bills, software, fuel, and a laptop used for both work and home. The answer to what can be claimed on tax in Australia usually isn't found in a flashy checklist. It's found in three principles: the expense must relate to income, the private portion must be removed, and the claim must be supported.

At Baron Tax & Accounting, a common pattern appears across FY 2025-26 returns. Most errors don't come from obscure tax law. They come from ordinary people treating common spending as automatically deductible, even when the work connection or records are weak. That's why a principles-based approach tends to produce cleaner, more defensible claims than a generic “top deductions” list.

Table of Contents

• The Three Golden Rules for Claiming Deductions - The income connection test - Records are part of the claim - Apportionment decides the claimable amount

• What Work-Related Expenses Can Employees Claim? - Common employee claims that may be deductible - What work from home claims really require - What usually doesn't work

• What Business Expenses Can Sole Traders Claim? - Expenses that often arise in sole trader work - The practical difference between running costs and assets - Where GST and reporting fit in

• How to Calculate and Prove Your Tax Claims - What records are worth keeping - How apportionment works in practice - Using online tools and support carefully

• Are Investment and Other Expenses Deductible? - Investment expenses and the same core logic - Super contributions and tax-agent fees people miss

• Common Mistakes When Claiming Tax Deductions - Claims that fail because the private element was ignored - Claims that fail because the paperwork is weak

• Frequently Asked Questions About Tax Claims - Can occasional work from home still support a deduction - Can a phone bill be claimed if it is used for both work and private calls - Can gifts or donations be claimed - Are tax agent fees deductible - Can a sole trader claim home office costs - Do deductions always produce the same tax benefit

• Key Points to Review Before Lodgement - A practical pre-lodgement checklist - When a review is worth considering

The Three Golden Rules for Claiming Deductions

Most deduction questions become easier once three rules are applied in the right order. They matter more than any category list because they explain why one expense is allowed and a similar-looking one isn't.

The income connection test

The first rule is the nexus test. An expense needs a real connection to earning assessable income. Australian guidance reflects that core rule and also makes clear that private or domestic spending isn't deductible, while mixed-use spending is only claimable to the extent it relates to income earning. The same guidance also notes that tax records must be in writing, in English or convertible to English, and kept for five years under business.gov.au tax deduction guidance.

A simple way to test nexus is to ask whether the expense arose because the person was doing their work or running their business, rather than just living their life.

Practical rule: If the expense would still have existed in much the same form without the job or business, it's often wholly private or partly private.

Records are part of the claim

A deduction isn't just about being right in theory. It also has to be substantiated. That means keeping documents that show what was paid, when it was paid, and what the expense related to.

Records matter because many claims are not all-or-nothing decisions. A person may have a legitimate work connection but still need better proof of the amount or purpose. Receipts, invoices, diary notes, usage records, and other written evidence often make the difference between a supportable claim and a guess.

Apportionment decides the claimable amount

The third rule is apportionment. In this context, many taxpayers overclaim without realising it. If a phone, internet service, car, or home office setup is used for both work and private purposes, only the work-related portion may be deductible.

That means the right question often isn't “Can this be claimed?” It is “What portion can be claimed?”

• Phone and internet: claim the work-related share, not the full bill.

• Laptop used at home: separate work use from personal streaming, study, or family use.

• Car expenses: separate income-producing travel from ordinary private travel.

• Home running costs: focus on additional costs that arise because work is being done.

These rules apply whether the taxpayer is an employee, investor, or sole trader. Once those foundations are clear, category-specific questions become far less confusing.

What Work-Related Expenses Can Employees Claim?

For PAYG employees, the most common claims sit in a familiar group: work-related travel, tools, protective items, union or professional costs, self-education linked to the current role, and work-from-home running costs. The issue usually isn't whether those categories exist. The issue is whether the expense was required for the job and not reimbursed.

Common employee claims that may be deductible

An employee may be able to claim expenses such as:

• Car and travel connected to work duties: not ordinary home-to-work commuting, but travel that is part of earning employment income.

• Protective clothing and occupation-specific items: where the item is clearly related to the role rather than everyday wear.

• Tools and equipment: where the employee buys and uses them for work.

• Self-education: if the study is sufficiently connected to current income-earning activities.

• Phone and internet use: where employment duties create a measurable work-related use.

• Fees and subscriptions tied to the job: where there is a direct work connection.

A practical example helps. If a technician buys tools that are used on the job and keeps the receipts, that may support a deduction. If the same person buys ordinary black shoes that could be worn anywhere, the private character usually becomes much harder to overcome.

What work from home claims really require

Hybrid work has created confusion because people often assume any day worked at home creates a deduction. The ATO's guidance is more exact. Work-from-home claims require evidence of actual additional running costs and recordkeeping, and being at home itself isn't enough. Mixed-use expenses must also be apportioned under the ATO's updated guidance for individuals.

That shifts the focus away from convenience and toward evidence.

Working from home doesn't turn household spending into a tax deduction by default. The claim needs a real additional cost and a reasonable work-related basis.

For many employees, the practical exercise is to identify what extra cost arose because work was done from home. That may include parts of electricity, internet, phone, or consumables, depending on the facts and the records available. A household bill that mostly exists for private living still needs a work-use calculation.

What usually doesn't work

Some claims fail not because the category is wrong, but because the facts don't support it.

Expense type	What tends to work	What tends not to work
Phone bill	Work-related share supported by usage records	Claiming the whole monthly plan without apportionment
Clothing	Protective or occupation-specific items	Conventional clothing with only a workplace preference
Self-education	Study linked to current work income	Study aimed at changing careers with no direct current link
Travel	Travel undertaken in the course of duties	Normal commuting between home and usual workplace

Employees who want a simpler process can prepare records first and then use an online tax return service in Australia or lodge through ATO online services if their affairs are straightforward. The key point is the same either way. The claim has to be supportable before it is entered.

What Business Expenses Can Sole Traders Claim?

Sole traders usually have broader deduction categories than employees because they incur costs directly in running a business. Australian guidance identifies common business deduction areas such as wages and super contributions, vehicle expenses, business travel, home-based business costs, and depreciating assets in this overview of deductible business categories.

That broader scope doesn't relax the rules. It means business taxpayers encounter more expenses that can satisfy the income connection test.

Expenses that often arise in sole trader work

For freelancers, contractors, rideshare drivers, tutors, cleaners, and similar ABN workers, common business costs often include:

• Operating costs: software, supplies, advertising, insurances, bank charges, and accounting-related costs.

• Work-related vehicle and travel costs: where the travel is part of earning business income.

• Home-based business costs: where part of the home is used to produce income and records support the business portion.

• Professional costs: licences, subscriptions, and fees connected to the business activity.

A sole trader designer paying for design software to complete client work is dealing with a business expense. A PAYG employee paying for an entertainment subscription while sometimes checking emails at home isn't in the same position. The underlying legal test is similar, but the factual setting is completely different.

The practical difference between running costs and assets

Some expenses are ordinary running costs. They are part of keeping the business operating. Others relate to depreciating assets, such as equipment used over time.

That difference matters because not every purchase is treated the same way in a tax return. A subscription or small supply item is usually analysed differently from a computer, camera, or machine used across multiple periods. The tax treatment depends on the nature of the item and how it is used in the business.

A sole trader should separate recurring operating expenses from asset purchases before year end. That makes the return more accurate and the records easier to review.

Where GST and reporting fit in

GST and BAS obligations don't determine whether an expense is deductible, but they do affect how records should be organised. A sole trader with platform income, invoices, or multiple income sources should keep the income trail and expense trail clean from the start.

Anyone who hasn't yet set up properly may need help with ABN registration before business income starts flowing. Once the structure is in place, the practical discipline is simple: keep business and private spending separated as much as possible, and document mixed-use items early rather than reconstructing them at tax time.

How to Calculate and Prove Your Tax Claims

A valid deduction still needs a number attached to it. That number should come from records and a reasonable method, not from memory at the end of June.

What records are worth keeping

Good records usually do two things. They prove the expense happened, and they explain the work or business purpose.

Useful records often include:

• Receipts and invoices: showing the supplier, date, item, and amount.

• Bank or card statements: useful as supporting evidence, but often not enough on their own.

• Diary notes or usage logs: especially helpful where only part of an expense is claimable.

• Work papers: spreadsheets or summaries that show how the claim was calculated.

How apportionment works in practice

Apportionment is where calculation discipline matters most. It isn't enough to know that a phone, internet service, or workspace has some work use. The taxpayer needs a rational basis for the percentage claimed.

A practical approach looks like this:

1. Identify the total cost for the period being claimed.

2. Work out the work-related usage basis using records, a diary, or another reasonable method.

3. Exclude the private portion rather than assuming full deductibility.

4. Keep the calculation notes with the source documents.

For home-related claims, this matters even more because household spending is usually mixed by nature. For vehicle and communication expenses, it helps to create records while the year is running instead of trying to rebuild usage months later.

The easiest deduction to defend is the one calculated from contemporaneous records, not a rounded estimate made at lodgement time.

Using online tools and support carefully

Calculation tools can help estimate taxable income and check whether entries are broadly consistent. They don't replace judgement about deductibility.

For that reason, some taxpayers use a tax calculator for rough planning and then review the final claim against their records before lodging. That approach works best when the taxpayer treats the calculator as a guide and not as proof.

Are Investment and Other Expenses Deductible?

The same principles don't stop at wages or ABN income. They also affect investment-related costs and a few procedural deductions that people often miss because they don't fit the usual work-expense checklist.

Investment expenses and the same core logic

If an expense is incurred in producing investment income, it may be deductible depending on the circumstances. The analysis still turns on connection, private use, and proof.

That can include costs linked to rental or share income where there is a clear relationship to the income-producing activity. The same caution applies here as it does elsewhere. Not every property or investment-related outgoing is immediately deductible, and not every amount connected with an asset is treated the same way.

Super contributions and tax-agent fees people miss

Some of the more valuable deductions are procedural rather than obvious. One example is a personal concessional super contribution. Consumer guidance notes that these contributions may be deductible for many people under 75, but only if the notice-of-intent process is completed and acknowledged by the fund. The same guidance also notes that tax-agent fees can be deductible in the year after they are incurred, as explained in this summary of commonly missed deductions.

That means the deduction doesn't just depend on making the payment. It depends on following the required steps.

A related planning point is that the concessional contributions cap is AUD 30,000, and excess contributions are dealt with through the tax system rather than ignored, as noted in the same verified guidance above. For taxpayers considering super as part of year-end planning, timing and paperwork matter just as much as the amount contributed.

Another area people forget is the cost of managing their tax affairs. A fee paid to a Registered Tax Agent may not help the current return, but it can become relevant in the following year. That's one reason accurate file notes and invoices are worth keeping beyond the lodgement date.

Common Mistakes When Claiming Tax Deductions

Many deduction problems are ordinary judgement errors. They tend to come from assumptions that feel reasonable in everyday life but don't hold up when the return is prepared properly.

Claims that fail because the private element was ignored

The classic example is mixed-use spending claimed at full value. Phone bills, internet plans, cars, laptops, and household costs often support a partial deduction, but not a full one. Once private use is obvious, a full claim becomes difficult to justify.

Another common mistake is treating everyday home-to-work travel as deductible. People often spend real money getting to work, but that doesn't mean the expense has the required income-producing character.

• Commuting confusion: travelling to the usual workplace is generally private in nature.

• Clothing overreach: ordinary clothes don't become deductible just because an employer prefers a certain look.

• Allowance misunderstanding: receiving an allowance doesn't automatically make the related expense deductible.

Claims that fail because the paperwork is weak

Some taxpayers rely only on transaction history from a bank account. That may show money left the account, but it doesn't always show what was bought or how it related to income.

Other claims fail because the taxpayer estimates a round figure without any supporting method. Rounded claims are not automatically wrong, but they often signal that the amount came from memory rather than records.

A claim can be reasonable in substance and still fail in practice if the supporting documents don't show enough detail.

A final mistake is copying what colleagues, friends, or social media posts claim to do. Tax deductions are highly fact-specific. What works for one worker, business owner, or investor may be private, reimbursed, or unsupported for someone else.

Frequently Asked Questions About Tax Claims

Can occasional work from home still support a deduction

Yes, it can, but only where there are actual additional running costs and records to support the claim. Occasional home work doesn't make general household spending deductible by itself.

Can a phone bill be claimed if it is used for both work and private calls

Usually only the work-related portion may be deductible. The stronger approach is to keep usage evidence and apply a reasonable apportionment method.

Can gifts or donations be claimed

Some gifts and donations may be deductible if they are made to a deductible gift recipient and the donation is over $2 with supporting records. Not every donation qualifies, so the recipient status and documentation matter.

Are tax agent fees deductible

They may be deductible in the year after they are incurred. Keeping the invoice and payment record helps support that later claim.

Can a sole trader claim home office costs

Potentially, yes. The claim depends on whether the home use relates to earning business income and how the business portion is worked out and documented.

Do deductions always produce the same tax benefit

No. Treasury has stated that the tax rate on income between AUD 18,201 and AUD 45,000 drops from 16% to 15% from 1 July 2026 and to 14% from 1 July 2027, and a separate AUD 250 Working Australians Tax Offset starts in 2027–28 under Treasury's Budget 2026–27 tax settings. That means the after-tax effect of a deduction can vary depending on income band and timing.

Key Points to Review Before Lodgement

The clearest answer to what can be claimed on tax in Australia is also the most reliable one. Claim expenses that are directly connected to earning income, exclude the private portion, and make sure the records can support the amount entered in the return.

A practical pre-lodgement checklist

Before lodging, it helps to review the return against a short checklist:

• Check the income link: each deduction should connect clearly to employment, business, or investment income.

• Remove private use: mixed expenses should be reduced to the claimable portion only.

• Match claims to records: receipts, invoices, notes, and calculations should line up.

• Review missed procedural claims: super contribution paperwork and prior-year tax-agent fees are easy to overlook.

• Sense-check the outcome: if a claim seems unusually broad, revisit the basis before lodging.

When a review is worth considering

A straightforward PAYG return may be manageable through myGov or ATO online services when records are clear and the deductions are simple. A review becomes more worthwhile where there are multiple income streams, sole trader activity, investment expenses, mixed-use assets, or uncertainty around apportionment.

In more complex situations, individuals may have their return reviewed by a tax accountant in Brisbane to help check compliance, records, and accuracy before lodgement.

This content is provided for general information purposes only. Outcomes vary depending on individual circumstances. For specific tax decisions, please consult a qualified professional.

Baron Tax & Accounting

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