What you need to know about small business incentives

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If you’re a small business owner and the word ‘taxes’ makes you shudder, this article is for you.

There’s no denying it. Tax hurts.

But the good news is, there are quite a few ways you can ease the pain. These can come in the form of tax deductions, offsets, credits or even grants that you may qualify for.

Tax Deductions

In fact, there are lots of way you, as an Australian small businesses owner, can reduce your tax burden or access funding in one form or another to help you set up or run your business.

But where do you even start?

You’ve come to the right place.

Keep reading!

This handy guide will help you understand what deductions you can claim to reduce your tax bill, and what other incentives are on offer to help give your small business a boost.

First, let’s talk about:

Tax deductions for small businesses

Tax deductions are the business expenses you can offset against the income your business generates. Deductions will reduce the amount of income you pay tax on – which of course means that you’ll pay less tax.

Before we go any further, let’s just check that yours is indeed a ‘small business’.

To qualify for any of these deductions you must have:

Tax Deductions for Small Businesses

If that’s you, then read on...

So what deductions can you make?

1. Travel

If you or any of your employees ever travel for work, you can probably deduct travel expenses (like airline, train or bus tickets).

You can also deduct expenses related to overnight travel – like hotel, food or other expenses – for one or more nights of business travel. BUT if you’re going to claim these expenses, you need to prove that they relate to a legitimate business activity.

That means you’ll need to keep written evidence of:

Written Evidence

Note that if you decide to take part in any leisure activities while on your business trip, you can’t deduct the cost of those. Sorry!

2. Expenses related to your motor vehicle

If you have a car or other motor vehicle that you use for your business, then you can claim some of the running costs.

Typically, you can deduct:

Small Business Deductibles

The way you’ll need to calculate these deductions will depend on:

  • The structure of your business (sole trader or partnership, company or trust)
  • The type of vehicle
  • How the vehicle is financed
  • How you use the it

Note that just like with your travel expenses, you can’t deduct expenses that relate to your private use of the vehicle (which includes your travel to and from work each day).

As with all types of tax deduction, you’ll need to keep all the documentation relating to your business vehicle – including purchase and registration documents, fuel receipts, tax invoices, any loan documents, and meticulous records of how you are using the vehicle (e.g. trip logs).

3. Maintenance and repairs on your business

If you incur expenses in order to keep your business operating, then you can deduct these from your taxes.

Say, for example, that you need to...

Maintenance Repairs on Your Business

…then you can deduct those expenses from your annual income.

You may ask whether there are any expenses you can’t claim when it comes to repairs?

Unfortunately, yes.

You are not able to claim capital expenses – which means that you can’t get a tax deduction for any substantial improvements you make to your property, or repairs you make to any machinery that you’ve just purchased.

Wondering why you can’t deduct those repairs?

It’s because the price you paid for the equipment reflects its condition – so the tax office considers any immediate repairs you have to make to bring it up to usable standards to be part of the purchase cost.

4. Home office expenses

Not all business owners work from a separate bricks-and-mortar location. Often, small business owners do all of their work from home.

If that’s you, there are some specific deductions you can claim:

Expenses related to occupancy, such as your rent or mortgage interest, land taxes and home insurance premiums.

Home Office Expenses

Wow! So I can claim all of my rent as a deduction?

Not quite!

There’s a formula that determines how much you can deduct:

Home Office Tax Deduction

And you can claim expenses such as:

  • Home-related operational expenses such as utilities, phone, internet, and general repairs
  • Home office equipment (as long as it is specifically for your work)

To claim these deductions, you’ll need to keep detailed records of:

  • How often you use any equipment for work-related activities rather than home or personal activities
  • Any receipts or written evidence for your business-related purchases
  • Phone records showing which of your calls are work-related

The rules on home office deductions are quite complex, so you might want to use this handy Home Office Expenses Calculator from the ATO to help you figure out exactly what you can and can’t claim.

5. Personal super contributions

Are you making any contributions to an eligible super fund?

If so, then you may well be able to claim these contributions as tax deductions if you’re under the age of seventy-five.

If you are between 65 and 74, however, you’ll need to pass a ‘work test’ before you can claim your super contributions, to prove that you worked for at least 40 hours over the course of 30 consecutive days during the financial year.

6. Other operating expenses

Other Expenses

When you’re running a small business, there are a lot of little expenses that quickly add up, and you can claim most of these as tax deductions too. They include:

  • Any rent you pay for an office space
  • Salaries/wages for your employees
  • Stationary
  • Advertising
  • Bank charges
  • Insurance premiums
  • Website maintenance
  • Parking fees
  • PR related expenses
  • Legal expenses
  • Costs associated with trading stock
  • Waste removal and/or recycling

If you’re not sure what deductions you’re entitled to claim, you should really engage an accountant to help you with your tax returns. They could help you find deductions you’ve missed and save you a lot of money – or save you from making mistakes that could lead to penalties from the tax office.


By the way:
Deductions aren’t the only way to save on your tax bill.
Here are some other ideas.

Other important tax tips for small businesses

1. Consider your business structure

You may find that your current business structure is not the best when it comes to saving you money at tax time.

If, for example, you’re a sole trader paying tax at the highest personal rate, incorporating your business as a company could lead to a reduction in tax rate. BUT this will depend entirely on your personal circumstances and the nature of your business, so you’ll definitely need to consult your financial advisors on this.

2. Keep records

This is always important. I know I’ve mentioned it already, but I can’t stress enough that you MUST keep records of your expenses. If you use one of the accounting packages I recommended, you can also keep an electronic copy of each receipt or invoice.

If you don’t have your records in order and the tax office decides to query or audit your claim you could end up facing penalties if you can’t prove you’re entitled to all the deductions you’ve claimed.

3. Be sure to pay your Goods and Services Tax (GST) by the due date

If you are late on paying your GST you could face interest on the overdue payments. Be sure to prepare and submit your Business Activity Statement (BAS) on time each quarter.

Note that if you are in financial difficulty and can’t pay by the date then you may be able to organise a payment plan with the ATO, but you’ll need to contact them as early as possible to arrange this.

4. Get additional help if you need it

It can be tricky to get your small business taxes right. You can hire a tax agent to give you advice or you might want to tap into some of these resources.

Right, that’s enough about tax.

Now, are there other incentives for small businesses in Australia?


Other incentives for small businesses in Australia:

There are some valuable small business incentives that don’t involve tax deductions, which could really help you to boost your growth.

Let’s see what you might qualify for!

1. R&D Tax Offset Incentive

R&D Tax Deduction

What is R&D incentive?

A refundable tax offset that supports research and development initiatives.

Can I apply? Yes, if you:

What are the benefits?

A tax offset equal to 43.5% of any costs you incur.

How do I apply?

You can register through the Australian Department of Industry right here.

2. Restart Incentive

Restart Tax Deduction

What is restart incentive?

An incentive encouraging you to hire older adults.

Can I apply? Yes, if you:

  • Have an Australian Business Number
  • Hire an employee over the age of fifty
  • Keep your new hire employed in an ongoing position for about twenty hours a week

What are the benefits?

Up to $10,000 in wage subsidies over the course of six months.

How do I apply?

Register your business with an employment services provider.

3. CSIRO Kick-Start Grant

CSIRO Tax Deduction

What is CSIRO grant?

A grant for start-ups and SMEs that are involved in research.

Can I apply? Yes, if you:

  • Are a registered Australian company that is registered for GST
  • Have an annual turnover of less than $1.5 million
  • Are researching new ideas that may offer future commercial potential OR are developing new, or improving upon existing, products or services

What are the benefits?

In order to help develop your research based business, CSIRO provides a matched funding grant of up to $50,000.

How do I apply?

Express your interest!

4. Certain Inputs to Manufacture (CIM) Programme

Import Tax Deduction

What is CIM programme?

A concession on import duties for specific raw materials.

Can I apply? Yes, if you:

  • Can show that using that foreign goods rather domestic goods will help you to create a better end product
  • Are importing eligible raw goods, which are: chemicals, paper goods, plastics, metal materials or the materials used in food packaging
  • Keep your new hire employed in an ongoing position for about twenty hours a week

What are the benefits?

Savings on the important duties you would have to pay.

How do I apply?

Print out and mail in this application form.

5. Australian Government Entrepreneurs Program


What is it?

A program designed to stimulate increased productivity and to boost creative, new ideas.

The program has four categories:

Accelerating Commercialisation

This provides support in the form of both funding and advice. If you qualify you could get valuable business tips and matched funding of up to $1 million for certain costs related to bringing innovative new products or services to the market.

You can express your interest here.

Accelerating Commercialisation

This provides support in the form of both funding and advice. If you qualify you could get valuable business tips and matched funding of up to $1 million for certain costs related to bringing innovative new products or services to the market.

Business management

This is an excellent resource if you’re looking for mentorship from professionals. They will make recommendations to help you grow your company through a Business Evaluation Action Plan, and will help you implement those strategies over the course of 12 months.

You are eligible for help in this category if:

  • Your business is in the medical technology, food, advanced manufacturing, mining, or agribusiness sectors.
  • Your turnover is between $1.5 million and $100 million annually.

See if you’re eligible here.

Incubator Support

This is designed to help Australian start-ups move towards the international market. If you qualify you could access a grant of up to $500,000.

Show your interest here.

Innovation Connections

This gives you access to experts in the research industry by connecting you with a professional facilitator. It also gives you financial benefits – you could receive up to $50,000 in matched funding in order to help you implement your innovative ideas.

Fill out this form to get started.

6. The National Innovation and Science Agenda

Innovation Research

If your business is focused on science, research, or innovation you may be able to access more incentives under the National Innovation and Science Agenda. This is an Australian Government initiative that channels funds to businesses that are improving the quality of life in Australia (creating jobs in the process).

There are lots of different programs under the National Innovation and Science Agenda which could be valuable source of funding for your business – find out if you could benefit.


As a small business in Australia there are several deductions you can use to ease the pain of your tax bill.

What’s more, there are lots of other incentives and grants you may be able to tap into to help you get established, grow your business or develop innovative new products.

The rules surrounding tax deductions can be pretty complicated, so it’s a good idea to get professional help with your tax return. That way you’ll make sure you don’t miss out on any deductions – and that you don’t make the (costly!) mistake of claiming something you’re not entitled to.

As for the other incentives, check out the resources listed in this article – and keep your eye on business.gov.au, where you’ll find an up-to-date list of grants, advice and training and other forms of assistance to help you start or grow your business.

Are there other ways you’ve found to save money or access funding as a small business? Let us know in the comments below!

Grow the business you want.

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