A deduction reduces your taxable income. It does not cut your tax bill dollar for dollar. This article is general planning guidance, not advice on your specific business.
We cover how to check eligibility, which deductions to review, how to weigh timing against cash flow, and what records to gather. Always confirm current 2026-27 ATO rules before you act.
Key Takeaways
- A deduction needs a direct link to earning business income, separate from private or capital spending.
- The financial year ends 30 June 2027, so check what must be paid, installed or written off by then.
- Review depreciation, super, wages, vehicles, home-based work, stock, bad debts and prepayments.
- Receipts, GST treatment and business-purpose notes are what defend a claim.
What Counts as an End-of-Year Tax Deduction in Australia?
How a deduction changes your tax
Under section 8-1 of the ITAA 1997, you can deduct a loss or outgoing to the extent it was incurred in earning assessable income or running a business for that purpose. Capital, private and domestic amounts are excluded.
A deduction lowers taxable income, so the saving depends on your rate. A tax offset is different: it reduces the tax payable itself.
For 2026-27, base rate entity companies pay 25% and other companies pay 30%. Resident individuals pay 30 cents per dollar between $45,001 and $135,000, for example.
Timing: the 2026-27 income year
The year runs 1 July 2026 to 30 June 2027. Not the calendar year. Your accounting method matters:
- Cash basis: income counts when received, and expenses generally when paid.
- Accruals basis: income counts when earned, and an expense is incurred once you are definitively committed to a present debt, even if unpaid.
Cash basis generally suits businesses whose income comes mainly from their own labour.
Business, private and mixed-use costs
Private use must be excluded. A phone used 60% for work supports a 60% claim, backed by a representative record of usage. The same logic applies to internet, vehicles, travel and home offices.
Operating costs versus capital spending
Operating costs are generally deductible in the year incurred, while capital costs are usually claimed over time through depreciation. A repair that restores function is deductible. A reconstruction or improvement that changes the asset's character is capital.
Entity and GST differences
How you claim depends on your structure:
- Sole traders and partners cannot deduct a salary paid to themselves.
- Companies and trusts can generally deduct employee wages.
- Partnerships lodge their own returns, and partners report their shares.
- Trust income allocation determines who pays tax on it.
If you are registered for GST (generally a $75,000 turnover threshold), exclude claimable GST credits from the deductible cost. Australian GST is 10% and is reported through your BAS.
Australian Business Deductions to Review Before 30 June 2027
Operating expenses
The ATO treats many day-to-day costs as deductible. Work through these categories and confirm each claim against the ATO expenses guidance:
- Trading stock, advertising, legal and insurance costs
- Training, wages and fringe benefits
- Rent, utilities, software and subscriptions
- Accounting fees, bank charges and office supplies
Payroll and superannuation
The super guarantee rate is 12% for 1 July 2026 to 30 June 2027. Under Payday Super, contributions are due each payday and must reach the fund within 7 business days. A payment sent before 30 June but received after it may miss the deadline.
Other payroll checkpoints:
- Employer contributions are deductible when the fund receives them
- The Small Business Superannuation Clearing House is no longer available
- The concessional contributions cap is $32,500 from 1 July 2026
Equipment and assets
Eligible small businesses (aggregated turnover under $10m) can immediately write off assets costing under $20,000, now a permanent measure. The asset must be first used or installed ready for use in the income year. Buying and paying is not enough.
Related asset rules:
- Keep an asset register with business-use percentages
- Depreciate using effective life where instant asset write-off does not apply
- Pool low-value assets costing under $1,000 each
- Small businesses on simplified depreciation generally pool assets at or above the threshold
Vehicles, travel and home-based work
For 2026-27 car claims:
- Cents-per-kilometre rate is 91 cents, capped at 5,000 work kilometres per car
- No other car expenses can be claimed on top of that method
- Car limit is $69,883
- Logbook method needs a representative 12-week logbook and odometer records
Those simplified methods suit sole traders and some partnerships. Companies and trusts generally use actual costs.
Home-based claims need a space with the character of a place of business before you claim occupancy costs. Running costs can be apportioned. The fixed-rate method needs a full-year record of hours.
Check the ATO's current fixed rate before using it. The published 70 cents per hour covers earlier years only.
Overnight travel requires a diary for sole traders and partners, including trips of six or more consecutive nights.
Stock, bad debts, prepayments and promotion
- Trading stock: eligible small businesses can skip a formal stocktake if the estimated change in value is $5,000 or less, with a supportable estimate.
- Bad debts: write them off in writing before 30 June. The amount must have been included in assessable income, so cash-basis unpaid income generally fails.
- Prepayments: the 12-month rule can allow an immediate deduction where the service period is 12 months or less and ends by the next income year.
- Gifts versus sponsorship: a deductible gift goes to a deductible gift recipient with no material benefit in return. Genuine advertising or sponsorship is judged on business-purpose rules.
Year-End Tax Planning Strategies for 2027
Start with a realistic estimate
Use reconciled year-to-date accounts, last year's return, expected income, deductible costs, PAYG instalments and your entity structure. Without an estimate, every other decision is a guess.
Accelerate only genuine deductions
Review repairs, subscriptions, professional fees and contributions you were going to pay anyway. Spending $10,000 to save about $3,000 in tax leaves you $7,000 worse off.
Time asset purchases around business need
An invoice or deposit before 30 June may not be enough. If the asset must be delivered or installed, it has to be ready for use within the year. Weigh cash flow and expected business use first.
Look at income, losses and obligations together
Invoicing timing is only appropriate where commercially and legally sound. Review it alongside:
- Tax losses (individuals face non-commercial loss rules, while companies face continuity tests)
- PAYG instalments, which can be varied if you have overestimated or underestimated
- GST and payroll, including Single Touch Payroll and state payroll tax
- Anti-avoidance: Part IVA can apply where the dominant purpose is a tax benefit
Coordinate business and personal planning
Several personal and entity rules also close at year-end:
- Personal super deductions need a valid notice of intent and fund acknowledgement
- Trust distribution resolutions are generally due by 30 June or an earlier deed deadline
- Private company payments to shareholders may be deemed dividends under Division 7A unless repaid or covered by a complying loan
These areas need a registered tax agent.
How to Substantiate Deductions and Avoid ATO Problems
Build a complete evidence file
Collect:
- Tax invoices and receipts
- Bank and credit-card statements
- Contracts and asset registers
- Stock records
- Travel details and vehicle logbooks
- Home-office calculations
- Written notes on business purpose
Keep most business records for 5 years. In an ATO sample of 1,928 small business taxpayers, only 54% reported correctly, with private motor vehicle use a common problem.
Reconcile accounting and GST records
Reconcile bank, payment and GST accounts before year-end. For GST credits, a tax invoice is required for purchases over $82.50.
When you claim:
- Deduct amounts net of any GST credits
- Adjust for private use
- Do not claim the same amount twice (once as a credit and again as a deduction)
When outsourced accounting support helps
If your books are behind, VJM Global provides bookkeeping, tax compliance, payroll and year-end financial reporting for Australian businesses, using offshore teams in India. Complete year-end reports can feed into your corporate tax return. No refund or tax outcome is guaranteed.
End-of-Year Tax Deduction Checklist for Australian Businesses
Several months before 30 June 2027
- Review the profit-and-loss statement
- Reconcile bank and payment accounts
- Chase missing receipts
- Check asset and inventory records
- Estimate taxable income
- Confirm which concessions apply
Before the financial year closes
- Confirm super has reached the fund
- Document business purposes
- Complete any required stocktake
- Write off bad debts in writing
- Verify assets are ready for use and meet current rules
After 30 June 2027
- Retain supporting records
- Reconcile GST and payroll data
- Send complete documents to your tax adviser
- Confirm lodgment and payment dates (self-lodged returns are generally due 31 October, but company dates vary)
- Compare the final result with your estimate
Frequently Asked Questions
How do deductions work on taxes?
An allowable deduction reduces taxable income, subject to eligibility, apportionment and timing rules. It is not usually a dollar-for-dollar reduction of tax.
How do people get $10,000 tax refunds?
A refund generally arises when PAYG withholding or instalments exceed final tax payable. Deductions alone do not guarantee a $10,000 refund.
What expenses can a small business claim as tax deductions in Australia?
Common categories include operating costs, wages, eligible super, professional fees, business-use assets and vehicle costs. Private and capital amounts are excluded.
Can I claim an expense if I paid for it before 30 June?
Not necessarily. Deductibility depends on your accounting method, the prepayment rules, the nature of the expense and your entity structure.
What is the difference between an immediate deduction and depreciation?
Eligible operating expenses are claimed in the year incurred. Capital assets are generally deducted over time, unless a concession such as the $20,000 instant asset write-off applies.
What records do I need to keep for business tax deductions?
Keep invoices, receipts, bank records, asset details, business-purpose notes, vehicle and travel records, and apportionment calculations, generally for 5 years.
