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Small Business Tax Changes 2025-26: Complete Guide to Rates, Concessions & Deductions

Remember when managing your small business taxes felt straightforward? Pick your structure, claim your deductions, and lodge your return. Those days are long gone. Between changes to instant asset write-offs, evolving work-from-home rules, shifting company tax thresholds, and new compliance requirements, staying on top of small business tax obligations has become a full-time job in itself.

If you’re a small business owner wondering “What’s changed for 2025-26?” or “Am I missing out on concessions I should be claiming?” — you’re asking the right questions. The tax landscape for Australian small businesses continues to evolve, with some generous concessions expiring, others being extended, and new compliance requirements coming into effect.

Here’s what might surprise you: while some headline concessions are being wound back, there are actually more small business tax opportunities available in 2025-26 than many business owners realise. The key is understanding which thresholds apply to your business, when to time major purchases, and how to structure your affairs to maximise available concessions.

Quick Summary: Small Business Tax Changes 2025-26

Australian small businesses face significant changes in 2025-26, with the instant asset write-off dropping from $20,000 to $1,000 unless extended, but numerous other concessions remaining available. Understanding your business’s aggregated turnover determines access to different tiers of benefits across multiple thresholds.

Key changes and thresholds for 2025-26:

  • Instant asset write-off: Now at $1,000 threshold (reduced from $20,000 in 2024-25. (Extension has not yet passed Parliament)
  • Company tax rates: 25% for base rate entities vs 30% for others
  • Working from home: Fixed rate increased to 70 cents per hour
  • Small business thresholds: $10M, $50M, and $500M for different concessions
  • GST cash accounting: Available for businesses under $10M turnover
  • Simplified depreciation: 15% first year, 30% ongoing for eligible assets

The critical insight: Small business tax planning now requires understanding multiple turnover thresholds rather than a single “small business” definition. Getting your aggregated turnover calculation right determines access to concessions worth thousands of dollars annually.

The New Small Business Tax Landscape: Multiple Thresholds, Multiple Opportunities

Let’s face it — the idea of a single “small business” threshold is dead. In 2025-26, your business’s tax treatment depends on where you sit across multiple turnover bands, each unlocking different concessions and obligations.

The modern small business reality: Australian businesses now navigate at least four major turnover thresholds, each determining access to different tax concessions and compliance requirements.

“We’ve moved from a simple small vs large business model to a sophisticated tier system,” explains Patricia Wong, an ITP senior business tax advisor with 18 years of experience. “Many business owners don’t realise they’re missing out on concessions because they’re only looking at the $10 million threshold when their business might qualify for benefits up to $50 million.”

The critical thresholds for 2025-26:

  • Under $10 million: Maximum small business concessions including simplified depreciation
  • $10-50 million: Company tax rate benefits and some concessions
  • $50-500 million: Limited concessions but specific compliance requirements
  • Over $500 million: Large business rules and monthly PAYG requirements

What this means for your business: Success in small business tax planning now requires understanding which concessions apply at your turnover level and timing business decisions to optimise your position across multiple thresholds.

The Great Asset Write-Off Reality Check: From $20,000 to $1,000

Here’s the change that’s got every small business owner and tax professional talking (and not in a good way). The instant asset write-off, which has been a cornerstone of small business tax planning for years, has faced its biggest reduction ever in 2025-26.

What’s Changed with Asset Write-Offs

The stark reality for 2025-26: The instant asset write-off threshold has dropped from $20,000 to just $1,000 for eligible small businesses.

The transition:

  • 2024-25: $20,000 threshold (expired June 30, 2025)
  • 2025-26: $1,000 threshold (current position)
  • Eligibility: Businesses with aggregated turnover under $10 million

“The Labor Government promised to extend this excellent deduction opportunity for small businesses again for this next financial year,” says ITP business tax pro, Jennifer Liu. “But then we heard not a peep from them since winning the election. Unfortunately, businesses that missed the June 30, 2025 deadline now face a dramatically different tax treatment for equipment purchases.”

Strategic Response: Working Within the New Reality

The new landscape: With the $20,000 threshold now expired, businesses must adapt their equipment purchasing strategies.

Current planning strategies:

  • Multiple small purchases: Break larger equipment needs into items under $1,000 where practical
  • Timing within financial year: Spread purchases across the financial year for cash flow management
  • Depreciation planning: Understand that items over $1,000 must use simplified depreciation
  • Business portion focus: Ensure accurate business use percentages for mixed-use items

Example: Sarah’s consulting business now needs equipment in 2025-26:

  • Laptop ($3,000): Only $1,000 immediately deductible, remainder goes to depreciation pool
  • Desk chair ($800): Fully deductible immediately
  • Software ($1,200): Only $1,000 immediately deductible, remainder depreciated

Alternative Depreciation Options

When assets exceed the $1,000 threshold: Businesses can still access accelerated depreciation through the simplified depreciation pool.

Simplified depreciation benefits:

  • 15% deduction in the first year
  • 30% deduction each subsequent year
  • Available for businesses under $10 million aggregated turnover
  • Pooling of assets simplifies record-keeping

Company Tax Rates: The 25% vs 30% Decision

While company tax rates themselves aren’t changing for 2025-26, understanding base rate entity eligibility remains crucial for small business tax planning, especially as businesses grow.

Base Rate Entity Eligibility

To qualify for the 25% company tax rate in 2025-26:

  • Aggregated turnover under $50 million
  • 80% or less passive income (base rate entity passive income test)

The aggregated turnover trap: Many business owners forget to include connected entities and affiliates in their turnover calculation.

“We regularly see businesses that think they qualify for the 25% rate because their individual company turnover is under $50 million,” notes Michael Chen, an ITP company tax specialist. “But when you add related entities, trusts, and family companies, they exceed the threshold and face the 30% rate.”

Planning Around the Thresholds

For businesses approaching $50 million: Consider whether structure changes could maintain base rate entity status while supporting business growth.

Passive income considerations: Investment returns, rental income, and interest can push businesses over the 80% passive income threshold, triggering the higher 30% rate even with low turnover.

Working From Home: The 70 Cent Reality

Small business owners and their employees benefit from updated working from home rules that recognise the permanent shift to flexible work arrangements.

Updated Rates for 2025-26

Fixed rate method increases to 70 cents per hour for the 2024-25 and subsequent years, up from the previous 67 cents.

What the 70 cents covers:

  • Electricity and gas for heating, cooling, lighting
  • Phone and internet expenses
  • Computer consumables and stationery
  • Depreciation of home office equipment

Record-keeping requirements: Businesses and employees must maintain detailed records of work-from-home hours — estimates are no longer acceptable.

Business Implications

For small business owners: Working from home expenses can be claimed as business deductions when working from a home office.

For businesses with employees: Consider whether to provide work-from-home allowances and understand the FBT implications.

The increase to 70 cents reflects the ATO’s recognition that working from home costs have genuinely increased, along with the cost of living (think electricity, gas, and water bills).. For businesses with significant home-based operations, this can result in meaningful tax savings, so be sure you’re not missing out on these. .

Small Business Concessions: Your Tier-by-Tier Guide

Understanding which concessions apply to your business requires knowing exactly where you sit in the small business hierarchy.

Under $10 Million: Maximum Concessions

Businesses with aggregated turnover under $10 million access the full range of small business concessions:

Tax concessions available:

  • Instant asset write-off ($1,000 threshold for 2025-26)
  • Simplified depreciation rules (15% first year, 30% ongoing)
  • Small business income tax offset (up to $1,000)
  • Immediate deduction for prepaid expenses (12-month rule)
  • Small business CGT concessions (subject to separate $2 million test)
  • GST cash accounting and annual BAS options
  • PAYG instalments based on GDP-adjusted notional tax

Administrative benefits:

  • Simplified trading stock rules
  • Two-year amendment period (instead of four years)
  • Access to small business advisory services

$10-50 Million: Selective Benefits

Businesses in this range maintain access to key concessions while losing others:

Still available:

  • 25% company tax rate (if base rate entity eligible)
  • Small business restructure rollover
  • Some depreciation benefits
  • Certain administrative simplifications

No longer available:

  • Instant asset write-off
  • Simplified depreciation pool
  • Small business income tax offset
  • Most cash flow concessions

$50-500 Million: Limited Concessions

Larger small businesses face increased compliance but retain some benefits:

Compliance requirements:

  • Monthly PAYG instalments (for companies over $20 million)
  • Enhanced reporting obligations
  • Limited access to small business concessions

Remaining benefits:

  • Access to certain industry-specific concessions
  • R&D tax incentives (different thresholds apply)
  • Some depreciation options

GST and Cash Flow: Simplified Systems for Small Business

Small businesses with under $10 million in aggregated turnover can access simplified GST treatment that significantly reduces administrative burden.

GST Cash Accounting

Cash accounting benefits:

  • GST payable only when payment received
  • GST credits claimed only when expenses paid
  • Improved cash flow management
  • Reduced compliance complexity

Annual BAS option: Businesses under $20 million can lodge BAS annually instead of quarterly, further reducing administrative burden.

GST Registration Thresholds

Voluntary registration considerations: Businesses under the $75,000 threshold should consider voluntary GST registration if:

  • Purchasing significant equipment or assets
  • Expecting rapid growth
  • Wanting to appear more established to customers

“Many small businesses miss the cash flow benefits of GST cash accounting,” notes Rachel Wong, an ITP GST specialist. “The ability to defer GST payments until you’ve actually received customer payments can make a real difference to cash flow.”

Superannuation Guarantee: Small Business Obligations

Small businesses face ongoing increases in superannuation guarantee rates and enhanced compliance monitoring.

Current and Future Rates

Superannuation guarantee rates:

  • 2024-25: 11.5% of ordinary time earnings
  • 2025-26: 12% of ordinary time earnings (final increase)
  • From 2025-26: Rate remains at 12% ongoing

Small Business Compliance Focus

ATO enforcement priorities for small business:

  • Superannuation guarantee compliance
  • Single Touch Payroll reporting
  • Correct classification of workers (employee vs contractor)
  • On-time superannuation payments

Penalties for non-compliance: The ATO has increased focus on superannuation guarantee non-compliance, with penalties including:

  • Superannuation guarantee charge (non-deductible)
  • Administrative penalties
  • Interest charges
  • Director penalty notices

FBT Considerations for Small Business

Fringe Benefits Tax applies to benefits provided to employees, but small businesses can access certain exemptions and concessions.

Common FBT Issues

Small business FBT scenarios:

  • Company cars provided to employees
  • Car parking benefits in CBDs
  • Entertainment and meal expenses
  • Work-from-home equipment and allowances
  • Staff amenities and benefits

FBT Exemptions and Concessions

Available exemptions:

  • Minor benefits (under $300 value)
  • Work-related equipment and tools
  • Car parking (outside CBD areas)
  • Certain entertainment in business premises

Planning opportunities: Structure employee benefits to maximise exemptions and minimise FBT liability while providing valuable staff benefits.

Record Keeping and Compliance: Modern Requirements

Small business record-keeping requirements have evolved significantly, with digital systems becoming essential for compliance.

Digital Record Keeping

ATO requirements for 2025-26:

  • Digital records acceptable (no paper requirement)
  • Cloud storage and backup systems recommended
  • Integration with accounting software beneficial
  • Mobile apps for expense tracking

Single Touch Payroll

Expanded STP requirements:

  • All employers (including small business) must use STP
  • Real-time reporting of payroll information
  • Enhanced compliance monitoring
  • Integration with superannuation guarantee reporting

“Modern small business compliance is about systems, not paperwork,” explains Anthony Martinez, an ITP compliance director. “Businesses with good digital systems find compliance much easier and often discover tax planning opportunities they would otherwise miss.”

FAQs: Your Small Business Tax Questions Answered

How do I know which small business concessions apply to my business?

Calculate your aggregated turnover (including connected entities and affiliates) to determine which threshold band applies. Under $10M gets maximum concessions, $10-50M gets selective benefits, and over $50M faces large business rules.

Should I have brought forward equipment purchases before the instant asset write-off dropped?

If you missed the June 30, 2025 deadline for the $20,000 threshold, focus on maximising the current $1,000 threshold and using simplified depreciation for larger items. Consider whether breaking larger purchases into smaller components might help.

How does the 25% company tax rate work with other small business concessions?

The 25% company tax rate applies to base rate entities (under $50M turnover with ≤80% passive income), while other small business concessions mainly apply to businesses under $10M turnover. You can qualify for both if eligible.

What happens if my business grows beyond the small business thresholds?

You lose access to concessions prospectively but don’t need to reverse past benefits. Plan for the transition by understanding which concessions you’ll lose and implementing systems for enhanced compliance requirements.

Can I claim both work-from-home expenses and business office expenses?

Yes, if you genuinely use both. You can claim home office expenses for time worked from home and business premises expenses for time worked in the office, provided you don’t double-claim the same expenses.

Do I need to use the simplified depreciation pool if my turnover is under $10M?

It’s optional but often beneficial. You can choose to use simplified depreciation or regular depreciation rules, but once you start using simplified depreciation, you must continue unless you opt out (and then face a five-year lock-out period).

Small Business Tax Planning Checklist for 2025-26

Here’s a checklist to keep handy and make the tax planning for your small business more simple and less stressful: 

Before you submit your tax return for 2024-25:

  • Review planned equipment purchases for instant asset write-off opportunities
  • Calculate aggregated turnover including all connected entities and affiliates
  • Assess whether business structure changes could optimise tax position
  • Ensure superannuation guarantee compliance and STP reporting
  • Review work-from-home arrangements and record-keeping systems

For the 2025-26 financial year:

  • Implement new $1,000 instant asset write-off threshold planning
  • Update working from home records for 70 cent per hour rate
  • Monitor aggregated turnover throughout year for threshold management
  • Review GST cash accounting and BAS frequency options
  • Plan timing of income and expenses around small business thresholds

Ongoing compliance focus:

  • Maintain digital record-keeping systems
  • Monitor superannuation guarantee rate increases
  • Track work-from-home hours and expenses
  • Document business use percentages for mixed-use assets
  • Keep evidence of instant asset write-off eligibility and timing

Strategic planning considerations:

  • Structure purchases to maximise available concessions
  • Time income recognition to optimise threshold positions
  • Consider entity restructuring for growing businesses
  • Plan for FBT implications of employee benefits
  • Integrate tax planning with broader business strategy

Professional Support for Small Business Tax Complexity

Small business tax has evolved beyond DIY territory for most business owners. With multiple thresholds, changing concessions, and enhanced compliance requirements, professional guidance ensures you maximise benefits while meeting all obligations.

Small business tax planning now requires expertise across company law, trust structures, employment obligations, and digital compliance systems. Professional guidance ensures you access all available concessions while avoiding costly mistakes.

At ITP, our experienced small business tax specialists have helped thousands of Australian small businesses navigate the evolving tax landscape over our 50+ years in practice. We understand how to optimise your position across multiple thresholds and concessions.

Our small business tax services include:

  • Aggregated turnover calculations and threshold planning
  • Business structure reviews and optimisation
  • Instant asset write-off and depreciation strategies
  • Work-from-home and FBT compliance
  • Digital record-keeping system implementation
  • Ongoing compliance and strategic tax planning

Consider professional help when:

  • Your aggregated turnover is approaching any major threshold
  • You’re planning significant equipment or asset purchases
  • Your business structure includes multiple entities or family arrangements
  • You need help implementing compliant digital systems
  • You want to ensure you’re accessing all available small business concessions

“Small business tax planning is about understanding the full ecosystem of concessions and obligations,” says Rebecca Foster, an ITP small business advisory specialist. “We help clients navigate the complexity while ensuring they never miss an opportunity to legitimately reduce their tax burden.”

Ready to optimise your small business tax position for 2025-26? Contact your nearest ITP office to speak with a qualified small business tax specialist who can assess your specific situation and develop a comprehensive strategy.

If you need help with specific aspects like individual tax returns for business owners or company tax compliance, our integrated approach ensures all elements of your tax position work together optimally.

The Bottom Line: Complexity Creates Opportunity

Small business tax in 2025-26 is undeniably more complex than it was five years ago. Multiple thresholds, evolving concessions, and enhanced compliance requirements mean the days of set-and-forget tax planning are over.

But here’s the opportunity: businesses that understand and actively manage their tax position can access significantly more benefits than those using outdated strategies. The key is treating tax planning as an integral part of business strategy, not an annual afterthought.

Your 2025-26 action plan:

  1. Calculate your true aggregated turnover including all connected entities
  2. Map your concessions based on your threshold band
  3. Time major purchases to maximise write-off benefits
  4. Implement systems for ongoing compliance and monitoring
  5. Plan strategically for business growth and threshold management

Whether your business is a startup accessing maximum small business concessions or a growing operation navigating multiple thresholds, success in 2025-26 requires understanding the full landscape of opportunities and obligations.

The businesses that thrive will be those that view tax compliance not as a cost centre, but as a strategic advantage in building a more profitable, sustainable operation.

Other Helpful Articles

Company Tax Rates Australia 2025: Complete Guide

Tax Deadlines Australia 2025: Key Dates for Your Tax Return

$20,000 Instant Asset Write-Off Ends 30 June 2025 — Or Does It?

EOFY 2024–25 Tax Tips for Small Business: How to Maximise Your Deductions and Minimise Your Tax Payable

Disclaimer: This article provides general information about small business tax changes and should not be considered personal tax advice. Tax laws are complex and individual business circumstances vary significantly. Small business concession eligibility depends on specific calculations including aggregated turnover and business structure. Always consult with a qualified tax professional who can assess your specific situation and provide advice tailored to your business needs. ITP Tax Professionals disclaims any liability for decisions made based solely on the general information provided in this article.

Remote Work Tax Deductions 2025: Complete Guide for Australian Employees

Remember March 2020 when your boss sent everyone home “for just a couple of weeks”? Fast forward to 2025, and that makeshift dining table office has become your permanent workspace. You’ve probably spent thousands on a proper desk, ergonomic chair, better internet, and let’s not forget the skyrocketing electricity bills from running the air con all day.

Here’s the thing that might surprise you: most of those costs are tax deductible. But here’s what might frustrate you: the rules have changed since those early COVID days, and many people are either claiming too little (missing out on money) or claiming incorrectly (hello, ATO audit risk).

If you’re working from home in 2025 — whether full-time, part-time, or in a hybrid arrangement — the tax landscape has evolved significantly since the pandemic began. The temporary “shortcut” methods are gone, but the permanent rules are actually more generous than many people realise. You just need to know how to navigate them properly.

Quick Summary: Working From Home Tax Deductions 2025-26

Australian employees can claim work-from-home expenses using two methods for 2025-26. The fixed rate method allows 70 cents per hour for running costs, while the actual cost method lets you claim the business portion of your real expenses. Equipment purchases can be immediately deducted up to $300 per item.

Key methods and rates for 2025-26:

  • Fixed rate method: 70 cents per hour worked from home
  • Actual cost method: Claim business percentage of actual expenses
  • Equipment immediate deduction: Up to $300 per item
  • Record keeping requirement: Diary or timesheet showing hours worked
  • Occupancy expenses: Generally not claimable for employees

Understanding which method suits your situation can make the difference between claiming hundreds versus thousands of dollars in legitimate deductions. Getting your record-keeping right from the start of the financial year ensures you can maximise your tax refund without ATO compliance issues.

The Remote Work Revolution: How COVID Changed Everything Forever

Let’s face it — the workplace will never go back to what it was before 2020. What started as a temporary health measure has fundamentally transformed how and where Australians work.

The numbers tell the story: According to the Australian Bureau of Statistics, before COVID only 4 – 8% of employed Australians worked from home regularly (2016 Census data), and by 2021 this peaked at 40% during pandemic restrictions. By 2024, this has stabilised at around 36% of employed Australians working from home regularly — representing a dramatic and permanent shift in how Australians work.

“In our 50+ years helping Australians with their taxes, we’ve never seen such a dramatic shift in how people work,” explains Sarah Chen, an ITP senior tax specialist with 15 years of experience. “The challenge is that many people are still using outdated information about what they can and can’t claim.”

What this means for your tax return:

  • Home office expenses are now mainstream deductions, not exceptions
  • The ATO has permanent (not temporary) guidance for remote work claims
  • Technology and equipment purchases have become significant deductible expenses
  • Hybrid work arrangements create unique calculation challenges

The opportunity most people miss: Many employees working from home are under-claiming because they don’t realise how generous the current rules actually are, or they’re using outdated methods that expired years ago.

Current ATO Methods for 2025-26: Your Two Options

Here’s where things get interesting (and where many people get confused). The ATO gives you two distinct ways to claim your working from home expenses, and choosing the right one can make a huge difference to your refund.

Fixed Rate Method: 70 Cents Per Hour

This is the “easy button” option that most people should seriously consider. You can claim 70 cents for every hour you work from home, and this covers most of your running expenses in one simple calculation.

What the 70 cents covers:

  • Phone and internet expenses
  • Computer consumables (paper, ink, stationery)
  • Home office equipment depreciation (computers, printers, furniture)
  • Electricity and gas for heating, cooling, and lighting

What you can claim separately:

  • The decline in value of equipment costing more than $300
  • Repairs and maintenance of home office equipment
  • Cleaning costs for your dedicated home office area

Example calculation: Jennifer works from home 3 days per week (24 hours) for 48 weeks:

  • Total hours: 24 × 48 = 1,152 hours
  • Deduction: 1,152 × $0.70 = $806

“The fixed rate method is perfect for people who want simplicity and don’t have huge setup costs,” notes Michael Rodriguez, an ITP work-from-home specialist with 12 years of experience. “But if you’ve invested heavily in equipment or have high electricity costs, the actual cost method might give you a bigger deduction.”

Actual Cost Method: Claim Your Real Expenses

This method requires more record-keeping but can deliver much larger deductions if you have significant home office expenses.

You can claim the work-related portion of:

  • Electricity, gas, and water bills (business use percentage)
  • Phone and internet costs (work-related portion)
  • Computer consumables and stationery
  • Equipment depreciation or immediate deduction
  • Repairs and maintenance of office equipment
  • Cleaning expenses for dedicated office areas

How to calculate business use percentage:

  • Floor area method: Office area ÷ total home area
  • Time-based method: Hours worked from home ÷ total hours in period

Example calculation: David’s home office is 10% of his house area, and he works from home 40% of the time:

  • Electricity bill: $2,000 × 10% × 40% = $80
  • Internet: $1,200 × 100% (work use) = $1,200
  • Equipment depreciation: $800
  • Total deduction: $2,080

Home Office Equipment: What You Can Claim and How

This is where remote workers can really maximise their tax benefits, especially if you’ve had to kit out a proper home office since the pandemic began.

Immediate Deductions: Items Under $300

You can immediately deduct the full cost of any work-related item costing $300 or less in the year you buy it. This is a fantastic benefit that many people don’t fully utilise.

Common immediate deductions:

  • Desk chairs (even expensive ergonomic ones under $300)
  • Monitors and small electronics
  • Desk accessories and storage
  • Software subscriptions and apps
  • Professional development books and courses
  • Webcams, headsets, and video call equipment

“I had a client who bought a $280 ergonomic chair, a $150 monitor stand, and $200 worth of office accessories in one year,” shares ITP tax professional, Jennifer Park. “That’s $630 in immediate deductions that many people would overlook.”

Depreciating Assets: Items Over $300

For equipment costing more than $300, you need to claim the decline in value over several years. But here’s the good news — you can often claim a significant portion in the first year.

Typical depreciation periods:

  • Computers and laptops: 2-3 years
  • Office furniture: 10-13 years
  • Printers and equipment: 5 years
  • Air conditioning units: 10 years

Example: $2,000 laptop purchased in July 2025:

  • Year 1 (2025-26): Claim approximately $800-1,000
  • Year 2 (2026-27): Claim remaining balance over depreciation period

The Equipment Strategy Most People Miss

Timing your purchases strategically can maximise your tax benefits. If you’re planning to upgrade your home office setup, consider the tax implications of when you buy.

Smart timing tips:

  • Buy items under $300 near the end of the financial year for immediate deduction
  • Purchase major equipment early in the financial year to maximise first-year depreciation
  • Spread larger purchases across financial years to optimise your tax position

Ongoing Expenses: Utilities, Internet, and Phone Costs

Here’s where the day-to-day costs of working from home really add up — and where you can claim some substantial deductions if you track things properly. Understanding the working from home expenses you’re entitled to claim is essential for maximising your tax position.

Electricity and Gas: The Hidden Goldmine

Your electricity bill probably increased significantly when you started working from home full-time. Running computers, monitors, air conditioning, and lighting all day adds up faster than most people realise.

What you can claim:

  • Additional electricity for running office equipment
  • Heating and cooling costs for your work hours
  • Lighting costs for your office area
  • Gas heating if you use gas appliances

Calculation methods:

  • Actual cost method: Calculate business use percentage of total bills
  • Fixed rate method: Included in the 70 cents per hour

Real-world example: Lisa’s quarterly electricity bill increased from $400 to $650 after working from home:

  • Additional cost: $250 per quarter = $1,000 per year
  • If her office is 15% of home area and she works 50% of time from home:
  • Claimable amount: $1,000 × 15% × 50% = $75

Internet and Phone: Essential Work Tools

These are often 100% deductible if you can demonstrate the expense is primarily for work purposes.

What’s typically claimable:

  • Unlimited internet plans required for video calls
  • Mobile phone plans used for work
  • Landline costs for work calls
  • Additional data charges for work use

For detailed guidance on claiming these expenses, refer to our blogs on How to Reduce Your Taxable Income in Australia (2025 Guide) and What Can I Claim on Tax Without Receipts? Here’s What the ATO Actually Allows.

“We see many clients who are too conservative with internet and phone claims,” explains David Kim, an ITP technology deduction specialist. “If you upgraded to a faster internet plan specifically for working from home, or if you’re using your phone primarily for work, you can often claim a much higher percentage than people think.”

Record Keeping in 2025: Modern Tracking Methods

Gone are the days of keeping shoeboxes full of receipts (thankfully). Modern record-keeping for work-from-home expenses can be streamlined and automated — but you still need to do it properly. The ATO provides clear guidance on record keeping for tax that applies to all deduction claims.

Essential Records You Must Keep

For any method you choose, you’ll need:

  • Diary or timesheet showing hours worked from home
  • Records of expenses (receipts, bills, bank statements)
  • Evidence of the work-related purpose of expenses
  • Documentation of your home office setup

Modern tracking tools:

  • Smartphone apps for expense tracking and photo receipts
  • Digital calendars to track work-from-home days
  • Banking apps that categorise expenses automatically
  • Cloud storage for receipt photos and documentation

The Diary Dilemma: How Detailed Do You Need to Be?

The ATO requires a record of when you worked from home, but it doesn’t need to be as detailed as many people think.

Minimum requirements:

  • Dates you worked from home
  • Number of hours worked each day
  • Nature of work activities (if not obvious)

Acceptable formats:

  • Electronic calendar entries
  • Smartphone apps with work tracking
  • Simple spreadsheet or diary
  • Employer’s timesheet system

What does that mean? A simple calendar entry that says ‘WFH 8 hours — client calls and report writing’ is perfectly adequate. You don’t need to document every phone call or email, for example.

Hybrid Work: The New Challenge

Here’s where things get a bit tricky. If you’re working partly from home and partly in the office (like millions of Australians now do), your calculations become more complex — but the potential deductions are still significant.

Calculating Hybrid Work Deductions

You can only claim expenses for the time you actually work from home, not for days when you’re in the office.

Example hybrid calculation: Tom works 3 days from home, 2 days in office:

  • Home days per week: 3 days × 8 hours = 24 hours
  • Annual hours (48 weeks): 24 × 48 = 1,152 hours
  • Fixed rate deduction: 1,152 × $0.70 = $806

Mixed-Use Equipment Challenges

When you use the same equipment for both home and office work, you need to apportion the deduction accordingly.

Smart approaches:

  • Separate laptops/equipment for home vs office use
  • Clear documentation of work-related vs personal use
  • Time-based apportionment for shared equipment

FAQs: Your Working From Home Tax Questions Answered

Can I claim my entire electricity bill when working from home?

No, you can only claim the business portion. This is typically calculated using floor area (office space ÷ total home area) multiplied by time worked from home (work hours ÷ total hours in billing period).

What’s the difference between the fixed rate and actual cost methods?

The fixed rate method (70 cents per hour) covers most running expenses simply. The actual cost method requires detailed records but can result in higher deductions if you have significant expenses or equipment purchases.

Do I need a separate room to claim home office expenses?

No, you don’t need a dedicated room. You can claim expenses for any area of your home used primarily for work, even if it’s the dining table or a corner of the bedroom.

How do I track my working from home hours?

Keep a simple diary, calendar, or timesheet showing dates and hours worked from home. Electronic records are fine — it doesn’t need to be on paper.

Can I claim my internet and phone bills?

Yes, you can claim the work-related portion. If your internet plan was upgraded specifically for work or your phone is used primarily for work, you may be able to claim a high percentage or even 100%.

What equipment purchases can I write off immediately?

Any work-related item costing $300 or less can be immediately deducted in full. Items over $300 must be depreciated over their effective life (usually 2-10 years depending on the item).

Working From Home Deductions Checklist

We’ve created an easy-to-use checklist to help you with work from home deductions. But with every great checklist comes a caveat: Always consult your income tax professional, they’ll help you submit your tax return properly, claim all appropriate deductions, and avoid getting caught out claiming things you’re not actually entitled to (like many people unwittingly do). 

Before claiming work-from-home expenses:

  • Determine which method (fixed rate vs actual cost) provides the bigger deduction
  • Set up a system to track your work-from-home hours
  • Keep receipts for all equipment and setup costs
  • Document your home office arrangement with photos
  • Calculate the business use percentage of your home

For the fixed rate method:

  • Track hours worked from home with a diary or timesheet
  • Keep records of equipment purchases over $300 for separate claims
  • Maintain receipts for office cleaning and equipment repairs
  • Document any dedicated office space for additional claims

For the actual cost method:

  • Calculate your home office area as percentage of total home
  • Keep all utility bills and calculate business use portions
  • Track internet, phone, and technology expenses
  • Maintain detailed records of all office-related purchases
  • Calculate depreciation for equipment over $300

Year-round record keeping:

  • Set up digital folders for different expense categories
  • Use smartphone apps to photograph receipts immediately
  • Update your work-from-home diary weekly, not at tax time
  • Review and reconcile expenses quarterly
  • Keep backup copies of all digital records

Professional Support for Complex Work-From-Home Situations

Let’s be honest — while the basic concept of claiming work-from-home expenses is straightforward, the details can get complicated fast. Especially if you’re juggling hybrid work arrangements, multiple income sources, or significant equipment investments.

Working from home tax deductions involve nuanced rules where mistakes can cost you money — either through missed deductions or ATO penalties for overclaiming. Professional guidance ensures you maximise legitimate claims while maintaining full compliance.

At ITP, our experienced individual tax specialists have helped thousands of Australians navigate work-from-home deductions since the remote work revolution began. We understand the evolving ATO guidelines and can optimise your claims for your specific work arrangement.

Our work-from-home services include:

  • Deduction method analysis to maximise your refund
  • Individual tax return preparation with WFH optimisation
  • Record-keeping system setup and training
  • ATO compliance reviews and audit support
  • Strategic advice for equipment purchases and timing

Consider professional help when:

  • You have significant home office setup costs
  • Your work arrangement is complex (multiple employers, contracting)
  • You’re unsure which deduction method provides better results
  • You need help establishing proper record-keeping systems
  • The ATO has questioned your work-from-home claims

“The investment in proper work-from-home tax advice typically pays for itself in the first year,” says Emma Thompson, an ITP senior personal tax advisor with 18 years of experience. “We regularly help clients discover deductions they didn’t know they could claim, often worth thousands of dollars annually.”

Ready to maximise your work-from-home tax deductions for 2025-26? Contact your nearest ITP office to speak with a qualified tax specialist who understands the complexities of remote work taxation and can develop a strategy tailored to your work arrangement.

If you’re a business owner providing work-from-home allowances to employees, our business tax specialists can also help you understand the FBT implications and optimise your employee benefits strategy.

Making Remote Work Pay: Your 2025-26 Action Plan

The remote work revolution isn’t going anywhere — if anything, it’s becoming more entrenched as both employers and employees recognise the benefits. This means your work-from-home tax strategy needs to be just as permanent and well-planned as your office setup.

Your 2025-26 action steps:

  1. Choose your method early: Decide between fixed rate and actual cost methods based on your setup
  2. Set up tracking systems: Implement record-keeping from July 1, not at tax time
  3. Plan equipment purchases: Time major purchases for maximum tax benefit
  4. Review quarterly: Assess whether your chosen method is still optimal
  5. Seek professional advice: Get expert guidance for complex situations

The bottom line: Working from home shouldn’t cost you money — it should save you money through legitimate tax deductions. The key is understanding the rules, keeping proper records, and claiming everything you’re entitled to claim.

Whether you’re a remote work veteran or new to the home office game, staying on top of your deductions ensures that your tax refund helps offset the real costs of maintaining a productive home workspace. And in 2025, with remote work firmly established as a permanent feature of the Australian workplace, those deductions are more valuable than ever.

For more insights on maximising your tax position, check out our comprehensive guide to tax deductions and strategies that complements your work-from-home claims.

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ATO Hit List 2025: Top Audit Targets This EOFY & How to Stay Compliant

Work Travel Expenses 2025 Tax Return: Complete ATO Guide

Tax Deadlines Australia 2025: Key Dates for Your Tax Return

Disclaimer: This article provides general information about working from home tax deductions and should not be considered personal tax advice. Tax laws are complex and individual circumstances vary significantly. Deduction eligibility depends on your specific work arrangements and the genuine work-related nature of expenses. Always consult with a qualified tax professional who can assess your specific situation and provide advice tailored to your individual circumstances. ITP Tax Professionals disclaims any liability for decisions made based solely on the general information provided in this article.

What Income to Declare on Your Tax Return 2025-26: Complete Guide

Here’s a scenario that plays out in thousands of Australian homes every tax season: you’re sitting at your computer, tax return half-finished, staring at that innocent-looking question “What other income did you receive?” Your brain starts racing. “Well, there was that Uber driving on weekends… and I sold some stuff on Facebook Marketplace… oh, and didn’t I make a bit from those cryptocurrency trades?”

Suddenly, what seemed like a simple tax return has become a minefield of uncertainty. Should you declare that $500 you made selling your old furniture? What about the $50 in Bitcoin you forgot you owned that somehow turned into $200? And don’t even get started on whether those Instagram sponsorship products count as income.

Here’s the truth that might surprise you: the ATO wants to know about almost every dollar that flows into your bank account. But here’s what might frustrate you: many people either under-declare (risking penalties) or over-declare (missing out on legitimate deductions). The good news? Understanding what to declare isn’t as complicated as it seems, and getting it right can actually increase your tax refund significantly.

Quick Summary: Income Declaration for 2025-26

Australian taxpayers must declare all assessable income including salary, business earnings, investment returns, government payments, sharing economy income, and cryptocurrency gains. For 2025-26, this includes modern income sources like social media monetisation, platform economy earnings, and digital asset transactions.

Key income types to declare:

  • Employment income: Salary, wages, allowances, bonuses, and benefits
  • Sharing economy: Uber, Airbnb, TaskRabbit, and platform earnings
  • Cryptocurrency: Trading profits, staking rewards, and digital asset sales
  • Investment income: Dividends, interest, rental income, and capital gains
  • Government payments: JobSeeker, Youth Allowance, and pension income
  • Foreign income: All overseas earnings for Australian tax residents
  • Business income: Sole trader, partnership, and trust distributions

Missing income declarations can trigger ATO data-matching alerts and result in penalties plus interest. Conversely, properly declaring all income often reveals additional deduction opportunities that can significantly increase your tax refund.

The Modern Income Reality: Why 2025 is Different

It’s a sign of the times — the way Australians earn money has fundamentally changed since the pandemic. The traditional “one job, one employer” model has given way to a gig economy where people have multiple income streams, side hustles, and digital earnings that didn’t even exist a decade ago.

The numbers tell the story: Over 2.5 million Australians now participate in the sharing economy, and cryptocurrency ownership has tripled since 2020. Social media monetisation has become a legitimate career path, and remote work has opened up international earning opportunities that were previously impossible.

“In our 50+ years helping Australians with their taxes, we’ve never seen such rapid changes in how people earn money,” explains Sarah Mitchell, an ITP senior tax specialist with 15 years of experience. “The challenge is that many taxpayers don’t realise that these new income sources have the same tax obligations as traditional employment.”

The ATO’s data-matching evolution: The tax office now receives data directly from:

  • Ride-sharing platforms (Uber, Ola, DiDi)
  • Accommodation platforms (Airbnb, Stayz)
  • Payment processors (PayPal, Stripe, Square)
  • Cryptocurrency exchanges (CoinSpot, Binance, Swyftx)
  • Social media platforms (YouTube, Facebook, Instagram)
  • Banking institutions (all interest and investment income)

What this means for your 2025-26 tax return: The ATO likely already knows about income sources you might be tempted to “forget.” Being proactive about declaration not only avoids penalties but often reveals deduction opportunities you hadn’t considered. Understanding what income is taxable, assessable, or exempt is crucial for proper compliance.

Employment Income: More Than Just Your Payslip

Most people think employment income is straightforward — just copy the numbers from your payment summary and you’re done. But modern employment arrangements are more complex than ever, and missing components can cost you deductions or trigger compliance issues.

Traditional Employment Income

Your payment summary should include:

  • Base salary or wages (including overtime and penalty rates)
  • Commissions and performance bonuses
  • Annual leave and long service leave payments
  • Allowances (car, travel, uniform, meal allowances)
  • Fringe benefits (reported but not necessarily taxable)
  • Superannuation contributions made by your employer

“We see clients who receive complex payment summaries with multiple allowances and benefits,” notes ITP individual tax specialist, David Chen. “Understanding what each component means can reveal significant deduction opportunities they might otherwise miss.”

Modern Employment Complications

Additional income that’s often overlooked:

  • Remote work allowances: Many employers now provide technology and home office allowances
  • Professional development reimbursements: Conference fees, course costs, certification programs
  • Wellness benefits: Gym memberships, mental health support, health insurance contributions
  • Stock options and employee share schemes: Increasingly common in tech and startup companies
  • Flexible benefit programs: Salary packaging arrangements that affect your taxable income

Contract and Gig Work Through Employers

The blurry line between employment and contracting: Many people now work as contractors through platforms or agencies while maintaining employee-like relationships. This income must be declared, but the tax treatment and available deductions differ significantly from traditional employment.

Examples requiring careful treatment:

  • Freelance work through agencies or platforms
  • Consulting arrangements with regular clients
  • Project-based work with ongoing relationships
  • Commission-only sales roles

The Sharing Economy Revolution: Your Side Hustle is Taxable

Here’s where many people get caught out. That weekend Uber driving, Airbnb hosting, or TaskRabbit handyman work isn’t just pocket money — it’s fully assessable income that the ATO takes very seriously. The sharing economy and tax obligations are now well-established and actively monitored.

Ride-Sharing and Delivery Services

Platforms that report your earnings to the ATO:

  • Uber (passenger rides and Uber Eats)
  • Ola and DiDi ride services
  • DoorDash, Menulog, and food delivery platforms
  • Amazon Flex and package delivery services

What you need to declare:

  • All passenger fares and delivery fees
  • Tips and bonuses received through the platform
  • Peak hour surge pricing and incentive payments
  • Referral bonuses for bringing new drivers

The deduction opportunity most people miss: If you’re earning sharing economy income, you can often claim significant deductions for vehicle expenses, phone costs, and equipment. Many drivers and delivery workers under-claim because they don’t realise their car expenses are largely deductible.

“I had a client earning $15,000 from Uber who was worried about the tax bill,” shares Jennifer Park, an ITP sharing economy specialist. “After properly calculating his vehicle deductions, depreciation, and other expenses, he ended up with a $2,000 refund instead of a debt. So, don’t be tempted to ‘forget about’ that income — it might even get you an extra refund!”

Short-Term Accommodation

Airbnb and holiday rental income includes:

  • Nightly rental fees from guests
  • Cleaning fees and additional charges
  • Security deposits (if retained)
  • Insurance payouts for property damage

Advanced consideration: If you’re renting out part of your main residence, the tax treatment is different from a separate investment property. You may be able to claim expenses without triggering capital gains tax on your home.

Task and Service Platforms

Growing platforms requiring income declaration:

  • Airtasker (handyman and service tasks)
  • Freelancer and Upwork (professional services)
  • Care.com (babysitting and pet care)
  • Hipages (trade services)
  • Fiverr (digital services and creative work)

Cryptocurrency and Digital Assets: The New Frontier

This is the income category that causes the most confusion and anxiety for Australian taxpayers. The ATO has made it crystal clear: cryptocurrency transactions are taxable events, and they have sophisticated tracking systems to monitor your activity.

What Cryptocurrency Income Includes

Taxable cryptocurrency activities:

  • Trading profits (buying low, selling high)
  • Staking rewards and yield farming returns
  • Mining income (both hobbyist and commercial)
  • Airdrops and fork rewards
  • DeFi protocol rewards and liquidity mining
  • NFT sales and digital collectible transactions
  • Cryptocurrency payments for goods or services

The record-keeping challenge: Every cryptocurrency transaction is potentially taxable, which means you need detailed records of dates, amounts, exchange rates, and transaction purposes.

Digital Asset Trading

Common scenarios requiring declaration:

  • Buying Bitcoin at $30,000 and selling at $45,000 (capital gain)
  • Receiving staking rewards from holding Ethereum
  • Mining cryptocurrency with your home computer
  • Selling NFTs or digital artwork
  • Converting one cryptocurrency to another (taxable exchange)

Cryptocurrency income is one of the most under-reported areas we see. Many people think that if they haven’t converted back to Australian dollars, it’s not taxable. That’s not correct — most transactions between cryptocurrencies are taxable events. Don’t get caught out by this and end up being audited by the ATO! 

Social Media and Content Monetisation

It’s a new era, and the tax implications around earning some cash via TikTok or Instagram are overlooked by a lot of influencers. What you need to know is: The influencer economy is fully taxable, including:

  • YouTube Partner Program payments
  • Instagram and TikTok creator funds
  • Sponsored post payments and brand partnerships
  • Affiliate marketing commissions
  • Patreon and subscription platform income
  • Merchandise sales through social media

Product partnerships and gifting: If you receive free products in exchange for promotion, you must declare the market value as income — even if you didn’t receive cash.

Investment Income: Beyond Bank Interest

Investment income has become more complex as Australians diversify their portfolios beyond traditional bank accounts and term deposits. Understanding what to declare can significantly impact your tax position.

Traditional Investment Income

Standard investment income sources:

  • Bank interest and term deposits: All interest earned, even small amounts
  • Dividend income: Cash dividends plus franking credits
  • Rental property income: All rental payments and bond interest
  • Managed fund distributions: Income and capital gains distributions
  • Bond and debenture interest: Government and corporate bonds

Modern Investment Platforms

New platforms requiring income declaration:

  • Micro-investing apps: Raiz, Spaceship, CommSec Pocket distributions
  • Peer-to-peer lending: RateSetter, SocietyOne interest payments
  • Robo-advisors: Stockspot, Clover portfolio distributions
  • International platforms: Interactive Brokers, eToro trading profits

The franking credit opportunity: Many investors don’t realise that franking credits can actually create a tax refund even if you have a low income. Properly declaring and claiming franking credits can significantly boost your return.

Property Investment Income

Rental income includes:

  • Weekly or monthly rental payments
  • Bond or security deposit interest
  • Insurance payouts for rental loss
  • Fees for property management services (paid by tenants)

“We regularly help clients optimise their property investment tax positions,” notes Emma Thompson, an ITP property tax advisor with 14 years of experience. “Proper income declaration often reveals deduction opportunities worth thousands of dollars annually.”

Government Payments: What’s Taxable in 2025-26

Government payment taxation can be confusing because some payments are taxable while others aren’t. Getting this wrong can result in unexpected tax bills or missed offset opportunities.

Taxable Government Payments

Payments you must declare as income:

  • JobSeeker Payment and Youth Allowance
  • Austudy and ABSTUDY payments
  • Parenting Payment (single and partnered)
  • Carer Payment and Disability Support Pension
  • Age Pension (taxable component)
  • DVA disability pension and war widow/widower pension
  • Newstart and transitional payments

Tax-Free Government Payments

Payments you should declare but won’t pay tax on:

  • Family Tax Benefit A and B
  • Child Care Subsidy and Child Care Benefit
  • Rent Assistance and utility concessions
  • Pharmaceutical Allowance
  • Energy Supplement
  • Clean Energy Supplement

Why declare tax-free payments: These amounts are used to calculate eligibility for other tax offsets and government benefits, so declaration is still required even though they’re not taxable.

Superannuation and Pension Income

Superannuation income streams:

  • Account-based pension payments
  • Transition to retirement income streams
  • Allocated pension payments
  • Lifetime and life expectancy pensions

Tax treatment depends on your age: If you’re over 60, most superannuation income is tax-free. If you’re under 60, portions may be taxable depending on the source of the contributions. The current tax rates for Australian residents determine your overall tax liability.

Foreign Income: The Global Income Requirement

As an Australian tax resident, you’re required to declare your worldwide income — regardless of where it was earned or whether tax was already paid overseas. This catches many people off guard, especially in our increasingly connected world. Understanding foreign income requirements is essential for compliance.

What Foreign Income Includes

All overseas earnings must be declared:

  • Foreign employment income and overseas salaries
  • International consulting and freelance work
  • Foreign rental property income
  • Overseas investment returns and dividends
  • Foreign pension and superannuation payments
  • Capital gains on overseas assets

The Digital Nomad Reality

Modern remote work scenarios:

  • Working for Australian companies while travelling overseas
  • Providing services to international clients
  • Earning income through global platforms (Upwork, Fiverr)
  • Cryptocurrency trading on international exchanges
  • Affiliate marketing with overseas companies

We’re seeing more clients who work remotely for international companies or have global income streams. Many don’t realise that being physically overseas doesn’t change their Australian tax obligations if they’re still tax residents. That doesn’t necessarily mean you’ll have to pay tax in two countries, but it depends on your individual circumstances. We recommend you talk to your tax professional as soon as you start earning an overseas income, to be sure where you stand with the ATO and you aren’t paying too much or too little tax. 

Foreign Tax Credits

Avoiding double taxation: Australia has tax treaties with over 40 countries to prevent double taxation. If you’ve paid tax overseas, you may be eligible for foreign tax credits to offset your Australian tax liability.

Documentation requirements: You’ll need official tax documents from the foreign country showing tax paid, converted to Australian dollars using the appropriate exchange rate.

Business and Self-Employment Income

If you’re earning money from your own business activities — whether as a sole trader, partnership, or through a trust — all of that income needs to be declared, along with any associated business expenses. The ATO provides comprehensive guidance on what business income to include in your tax return.

Sole Trader Income

All business income must be declared:

  • Sales revenue and service fees
  • Professional consulting income
  • Trade and contracting revenue
  • Commission and referral income
  • Business investment returns

Partnership and Trust Distributions

Income from business structures:

  • Partnership income (your share of profits/losses)
  • Trust distributions (even if not actually received)
  • Company dividends from private companies
  • Beneficiary entitlements from family trusts

Online Business Income

Digital business activities requiring declaration:

  • E-commerce sales (eBay, Amazon, Etsy)
  • Online course and digital product sales
  • Affiliate marketing commissions
  • Dropshipping business income
  • Software as a Service (SaaS) revenue

The bottom line from the ITP experts: The line between hobby and business can be blurry. But if you’re regularly earning money with the intention of making a profit, the ATO considers it business income with full tax obligations.

FAQs: Your Income Declaration Questions Answered

What income types must I declare on my 2025 tax return?

You must declare all assessable income including employment, business, investment, government payments, sharing economy earnings, cryptocurrency gains, and foreign income. Even small amounts should be included as they may affect your eligibility for tax offsets.

Do I need to declare cryptocurrency trading profits?

Yes, all cryptocurrency transactions are taxable events. This includes trading profits, staking rewards, mining income, and converting between different cryptocurrencies. You need records of every transaction including dates, amounts, and exchange rates.

Is Uber/Airbnb income taxable in Australia?

Yes, all sharing economy income is fully taxable. This includes ride-sharing fares, accommodation rental income, task-based work, and delivery services. However, you can also claim business expenses related to earning this income.

What government payments are tax-free?

Family Tax Benefits, Child Care Subsidy, Rent Assistance, and similar welfare payments are generally tax-free. However, you still need to declare them as they affect eligibility for other benefits and tax offsets.

How do I declare foreign income as an Australian resident?

Australian tax residents must declare worldwide income. Convert foreign income to Australian dollars using the exchange rate when you received it. You may be eligible for foreign tax credits if you paid tax overseas.

What sharing economy income must be reported?

All income from platforms like Uber, Airbnb, TaskRabbit, DoorDash, and similar services must be reported. This includes base payments, tips, bonuses, and surge pricing. The platforms report this data directly to the ATO.

Do I need to declare income from selling personal items?

Generally no, unless you’re regularly buying and selling items for profit (which becomes a business). Occasional sales of personal items are usually not taxable, but cryptocurrency and investment asset sales are different.

What happens if I forget to declare income?

The ATO’s data-matching systems will likely detect undeclared income. You may face penalties, interest charges, and be required to lodge amended returns. It’s better to declare everything and seek professional advice if unsure.

Professional Support for Complex Income Situations

Let’s be honest — if you’re reading this article and mentally checking off multiple income categories, your tax situation has probably moved beyond DIY territory. Complex income situations require professional guidance to ensure compliance and optimise your tax position.

Managing multiple income streams involves nuanced tax rules where mistakes can be costly. Professional guidance ensures you declare everything correctly while maximising legitimate deductions and tax planning opportunities.

At ITP, our experienced individual tax specialists have helped thousands of Australians navigate complex income declaration requirements over our 50+ years in practice. We understand the evolving ATO guidelines and can optimise your tax position regardless of how many income sources you have.

Our income declaration services include:

  • Comprehensive income assessment and categorisation
  • Individual tax return preparation with multi-income optimisation
  • Record-keeping system setup for complex situations
  • ATO compliance reviews and audit support
  • Strategic tax planning for multiple income streams

Consider professional help when:

  • You have five or more different income sources
  • Your total income exceeds $100,000 from multiple streams
  • You’re involved in cryptocurrency trading or complex investments
  • You have international income or work arrangements
  • You’re unsure about the tax treatment of specific income types
  • The ATO has questioned your income declarations previously

“The investment in proper tax advice for complex income situations typically pays for itself many times over,” says Amanda Clarke, an ITP senior personal tax advisor with 20 years of experience. “We regularly help clients discover legitimate deductions they didn’t know existed, often worth thousands of dollars annually.”

Ready to ensure all your income is properly declared and optimised for 2025-26? Contact your nearest ITP office to speak with a qualified tax specialist who understands the complexities of modern income sources and can develop a comprehensive strategy for your situation.

If you’re a business owner managing both personal and business income streams, our business tax specialists can help you optimise the interaction between your business and personal tax positions.

The Bottom Line: Declaration Leads to Deduction

Here’s the mindset shift that can transform your approach to income declaration: every dollar of income you declare creates an opportunity for legitimate deductions. The goal isn’t to minimise declared income — it’s to maximise your overall tax position through proper declaration and strategic deduction claiming.

The 2025-26 income reality:

  • Multiple income streams are now normal, not exceptional
  • The ATO’s data-matching capabilities mean transparency is essential
  • Proper declaration often reveals significant deduction opportunities
  • Professional guidance becomes more valuable as complexity increases

Your action plan for 2025-26:

  1. Audit your income sources: List every way money flows into your accounts
  2. Set up tracking systems: Implement modern record-keeping from day one
  3. Understand platform reporting: Know what the ATO already knows
  4. Plan strategically: Consider timing and structure of income
  5. Seek professional advice: Get expert guidance for complex situations

Whether you’re a traditional employee with a side hustle, a gig economy participant, or someone with complex investment and business income, the key to success is understanding your obligations and optimising your opportunities. In 2025, that means embracing transparency while maximising legitimate tax benefits.

For more insights on optimising your overall tax position, check out our comprehensive guide to tax deductions and strategies that complements proper income declaration.

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Work Travel Expenses 2025 Tax Return: Complete ATO Guide

Disclaimer: This article provides general information about income declaration requirements and should not be considered personal tax advice. Tax laws are complex and individual circumstances vary significantly. Income declaration requirements depend on your specific situation, residency status, and the nature of income received. Always consult with a qualified tax professional who can assess your specific circumstances and provide advice tailored to your individual needs. ITP Tax Professionals disclaims any liability for decisions made based solely on the general information provided in this article.

Australia Director

How to Take Money Out of Your Company: 5 Tax-Smart Methods for Australian Directors 2025

Quick Summary: Company Money Extraction Methods

Company directors have five legitimate ways to access company funds: salary/wages, dividends, loan repayments, fringe benefits, and Division 7A loans. Each method has different tax implications, and choosing the wrong approach can trigger unfranked dividends with significant tax consequences.

Key methods for 2025:

  • Salary/wages: Subject to PAYG withholding and superannuation
  • Franked dividends: Includes tax credits to avoid double taxation
  • Complying loans: Must meet Division 7A requirements with 8.37% interest rate
  • Loan repayments: Tax-free if genuine loan to company
  • Fringe benefits: Subject to FBT at 47% rate

Understanding these options is crucial because your company is a separate legal entity — taking money incorrectly can result in unfranked dividend treatment and substantial tax penalties. The stakes have never been higher with increased ATO scrutiny on Division 7A compliance.

Why You Can’t Just Take Money From Your Company

Let’s start with the fundamental truth that catches many business owners off guard: your company’s money isn’t actually your money, even if you’re the sole director and shareholder.

Your company is a separate legal entity under Australian law. This means the business bank account, assets, and profits belong to the company, not to you personally. While this structure provides asset protection and tax benefits, it also creates strict rules about how you can access those funds.

“The biggest mistake we see is business owners treating the company bank account like their personal wallet,” explains Patricia Wong, an ITP senior business tax advisor with 18 years of experience. “Even if you own 100% of the shares, you can’t just transfer money without proper documentation and tax consideration.”

The consequences of getting this wrong include:

The Australian Taxation Office has significantly increased its focus on Division 7A compliance in 2025, with enhanced data matching and automated detection systems identifying suspicious transactions between companies and their directors. (Read more here about who the ATO is targeting for auditing this year.)

Method 1: Salary, Wages, and Director’s Fees

Paying yourself a regular salary or director’s fees is the most straightforward method to extract money from your company. This approach provides predictable income and is fully deductible to the company.

How it works:

  • Company pays you as an employee or for director services
  • PAYG withholding applies to ensure tax is paid
  • Superannuation guarantee payments required (12% from July 2025)
  • You report income in your personal tax return

Tax implications:

  • Company claims full deduction for salary and super payments
  • You pay tax at marginal rates (up to 47% including Medicare levy)
  • Provides consistent cash flow and meets personal income requirements

“For most small business owners, a combination of modest salary plus dividends provides the best tax outcome,” notes David Chen, an ITP company tax specialist. “The salary covers living expenses and builds super, while dividends distribute profits tax-efficiently.”

When salary/wages work best:

  • You need regular, predictable income
  • Building superannuation is important for retirement planning
  • Company has consistent monthly cash flow
  • You want to minimise personal tax planning complexity

2025 considerations:

Method 2: Franked Dividends — The Tax-Efficient Option

Franked dividends are often the most tax-efficient way to distribute company profits because they include tax credits (franking credits) that eliminate double taxation of company profits.

How franked dividends work:

  • Company pays 25% or 30% tax on profits (depending on company tax rate)
  • Dividends are “franked” with credits equal to tax already paid
  • You receive dividend plus franking credits in your tax return
  • May receive refund if franking credits exceed your tax liability

Example calculation for 2025:

Company pays $30,000 dividend to shareholder:

  • Company tax paid: $10,000 (assuming 25% rate)
  • Dividend received: $30,000
  • Franking credits: $10,000
  • Total income to declare: $40,000
  • Your tax on $40,000 (at 32.5% rate): $13,000
  • Less franking credits: $10,000
  • Additional tax payable: $3,000

“Franked dividends are incredibly powerful for retirees or low-income earners,” explains Jennifer Walsh, an ITP tax planning specialist with 20 years of experience. “We’ve had clients receive franking credit refunds of $15,000 or more annually through strategic dividend planning.”

Dividend requirements:

  • Company must have retained earnings to pay dividends
  • Distribution statements must be issued within four months
  • Proper board resolutions declaring dividends required
  • Franking account must have sufficient credits

Method 3: Loan Repayments — Tax-Free Recovery

How about making money back from your company for nothing? This is totally legitimate and something loads of people overlook! If you’ve previously lent money to your company, repayments of these loans are completely tax-free as they’re returning your own capital.

Key requirements:

  • Original loan must be genuine and properly documented
  • Clear records showing money advanced to company
  • Repayments cannot exceed original loan amount
  • Interest received is taxable income

Documentation essentials:

  • Written loan agreements with terms and conditions
  • Bank records showing transfers to company
  • Board resolutions approving loan arrangements
  • Loan account records in company books

“We see many family businesses where parents lent money during startup, for example, but never properly documented it,” says Michael Rodriguez, an ITP senior partner. “Proper loan documentation from day one saves significant tax complications later.”

Common scenarios:

  • Startup capital provided by directors
  • Emergency funding during cash flow difficulties
  • Equipment purchases funded personally then reimbursed
  • Working capital loans during business expansion

Interest considerations:

  • Company can claim tax deductions for interest paid
  • You must declare interest received as assessable income
  • Consider market rates to avoid transfer pricing issues

Method 4: Fringe Benefits — Asset Use and Perks

Here’s another little misunderstood tax perk that you could be taking advantage of, if you’re not already. Fringe benefits allow you to access company assets or receive benefits with the company paying Fringe Benefits Tax (FBT) rather than you paying income tax.

Common fringe benefits:

  • Company car for private use
  • Home office equipment and furniture
  • Professional development and training
  • Accommodation and travel benefits

FBT calculation for 2025:

  • FBT rate: 47% on taxable value of benefits
  • Company pays FBT and claims deduction
  • You don’t report fringe benefits as income (unless reportable)
  • May be more tax-efficient than salary for certain benefits

Example: Company car

Company provides $50,000 car with 40% private use:

  • Taxable value: $20,000 (40% of $50,000)
  • FBT payable: $9,400 (47% of $20,000)
  • Total cost to company: $9,400 vs potentially $18,800 if paid as salary to someone on 47% tax rate

“For high-income earners, fringe benefits can provide substantial tax savings,” notes Lisa Park, an ITP FBT specialist. “The key is ensuring benefits provide genuine value and meet the ‘otherwise deductible’ tests.”

Strategic considerations:

  • Car fringe benefits using operating cost or statutory methods
  • Expense payment benefits for otherwise deductible expenses
  • Loan fringe benefits for low-interest loans to employees

Method 5: Division 7A Complying Loans

Need a big cash injection for personal uses? If you’ve got some cash tied up in your company, there’s a way to get your hands on those funds without paying the kinds of crazy interest rates you’d pay with a bank loan or a credit card! 

Division 7A loans allow you to borrow money from your company without immediate tax consequences, provided you meet strict compliance requirements.

Current requirements for 2025:

  • Interest rate: 8.37% (updated annually)
  • Written agreement signed before company lodgment day
  • Maximum 7 years unsecured (25 years if secured by property mortgage)
  • Minimum annual repayments calculated using ATO formula

Loan agreement essentials:

  • Parties clearly identified (company and borrower)
  • Loan amount and purpose
  • Interest rate and calculation method
  • Repayment schedule and terms
  • Security arrangements (if applicable)

Repayment options:

  • Cash repayments: Transfer money from personal account to company
  • Dividend repayments: Company declares dividend equal to required repayment
  • Salary/wage deductions: Company retains portion of salary to repay loan

“Division 7A loans are fantastic for major purchases like property deposits or renovations,” explains Rebecca Foster, an ITP corporate advisory specialist. “But they require disciplined management and accurate record-keeping to avoid deemed dividend treatment, which is why it’s always best to consult with your tax specialist.”

Strategic advantages:

  • Access large amounts without immediate tax
  • Spread tax impact over loan term through dividend repayments
  • Flexibility in repayment timing and methods
  • Can be combined with family trust distributions for tax optimisation

Warning signs to avoid:

  • Missing minimum annual repayments
  • Using loan proceeds to make further loans to company
  • Circular lending arrangements
  • Inadequate documentation or record-keeping

What Happens When You Get It Wrong: Division 7A Penalties

Before you get too excited about it, be very, very careful you understand how this works — you don’t want to go causing harm to your business, costing yourself money, or worst of all, angering the tax man! Getting company money extraction wrong triggers Division 7A deemed dividend treatment — one of the most expensive tax mistakes Australian business owners make.

Deemed dividend consequences:

  • Entire amount treated as unfranked dividend
  • Taxed at your marginal rate (up to 47%) with no franking credits
  • No deduction available to company
  • Interest charges on unpaid tax
  • Potential penalties for late payment

Real-world example:

A director takes $100,000 for personal home renovation without proper documentation:

  • Deemed dividend: $100,000
  • Tax at 47% rate: $47,000
  • No franking credits available
  • Compare to legitimate dividend: $47,000 tax minus $30,000 franking credits = $17,000
  • Additional cost of getting it wrong: $30,000

Common Division 7A triggers:

  • Using company credit cards for personal expenses
  • Paying family expenses from company accounts
  • Informal loans without written agreements
  • Using company funds for private property purchases
  • Providing assets to family members at below-market rates

“We see business owners make $50,000 mistakes because they used the company card for a family holiday,” warns Anthony Martinez, an ITP compliance expert. “The ATO’s data matching has become incredibly sophisticated — they’ll find these transactions. So, make sure you really understand what you’re doing, and keep the proper paperwork and records.”

2025 ATO enforcement trends:

  • Increased data matching with banking institutions
  • Automated detection of suspicious transaction patterns
  • Focus on lifestyle audits for high-wealth individuals
  • Enhanced penalties for repeated non-compliance

Strategic Planning: Optimising Your Money Extraction

They say life is all about balance, right? Likewise, the best approach to making money from your company legitimately and effectively combines multiple methods, to optimise your overall tax position and cash flow requirements.

Optimal extraction strategy for most small business owners:

  1. Base salary: Cover living expenses and super obligations
  2. Franked dividends: Distribute excess profits tax-efficiently
  3. Strategic timing: Pay dividends in low-income years
  4. Fringe benefits: Provide legitimate business benefits
  5. Division 7A loans: For major one-off expenses

Family trust structures:

Want to provide benefits to the whole family? Using a family trust as shareholder allows income streaming to different family members, helping them out while ensuring maximum tax efficiency for your company:

  • Adult children at university (tax-free threshold: $18,200)
  • Retired parents with low incomes
  • Spouses with lower marginal tax rates
  • Building adult children’s super through contributions

Cash flow management:

  • Plan dividend timing around personal income needs
  • Use loan accounts for temporary cash flow requirements
  • Coordinate with family income to optimise tax brackets
  • Consider multiple smaller dividends vs annual lump sums

“We’ve helped clients save $25,000+ annually through strategic family trust distributions,” shares Amanda Clarke, an ITP tax planning expert. “The key is understanding each family member’s complete tax situation and planning accordingly. We’ve helped many Aussies achieve the dreams they had when they started their companies in the first place — to run a great business, provide for their families, and secure their future.”

FAQs: Your Company Money Questions Answered

Can I take money out if my company is making losses?

You can take salary and loan repayments even during loss periods, but dividends require retained earnings. Consider whether continued losses indicate the need for additional capital injection.

What’s the difference between Division 7A and Division 7B?

Division 7A applies to private companies making payments to shareholders. Division 7B (not commonly used) applies to certain liquidation distributions.

Can I use a company credit card for personal expenses?

Only if properly documented as a loan or reimbursable expense. Personal use without documentation triggers Division 7A deemed dividend treatment.

How does Division 7A apply to family trusts?

If your company is a beneficiary of a family trust with unpaid entitlements, Division 7A may apply to benefits provided to shareholders.

What happens if I miss Division 7A loan repayments?

The shortfall is treated as an unfranked dividend. You must include it as assessable income and pay tax at marginal rates.

Can I forgive a Division 7A loan?

Loan forgiveness is treated as a dividend. The company must have sufficient franking credits to frank the forgiven amount, or it becomes an unfranked dividend.

Company Money Extraction Checklist

We know that there’s a lot to wrap your head around when you’re running a company, and making money out of your company isn’t as simple as it might have sounded when you decided to start it up. Getting these things wrong can not only cost you money and put the profitability of your company in jeopardy, it can also mean serious consequences from the ATO. But don’t worry, we’ve put together a quick checklist to help. (Use this to better understand how to make money out of your company, but always consult a tax professional before you make any decisions.)

Before taking money from your company:

  • Determine the most tax-efficient extraction method for your situation
  • Ensure proper documentation and board resolutions are in place
  • Calculate tax implications for both company and personal returns
  • Consider timing to optimise family income distribution
  • Review compliance with Division 7A requirements

For Division 7A loans specifically:

  • Prepare written loan agreement before company lodgment day
  • Set up loan account in company books
  • Calculate minimum annual repayments using ATO formula
  • Establish repayment method (cash, dividend, or salary deduction)
  • Monitor compliance throughout loan term

Annual review requirements:

  • Assess whether current extraction strategy remains optimal
  • Review family trust distribution opportunities
  • Update loan agreements for interest rate changes
  • Ensure all transactions are properly documented
  • Plan upcoming year’s extraction strategy

Professional Support for Company Money Management

Company money extraction involves complex tax rules where mistakes can be extremely expensive. Professional guidance ensures you maximise tax efficiency while maintaining full compliance.

At ITP, our experienced company tax specialists have helped thousands of business owners optimise their money extraction strategies over our 50+ years in practice. We understand the intricate balance between accessing your money and minimising tax.

Our company advisory services include:

  • Strategic extraction planning for directors and shareholders
  • Division 7A loan documentation and compliance monitoring
  • Family trust structure optimisation and income streaming
  • FBT planning and compliance for fringe benefits
  • ATO audit support and representation for Division 7A issues

Consider professional help when:

  • Your company generates significant profits requiring extraction planning
  • You’re considering major personal purchases requiring company funds
  • Family members are involved in the business requiring trust structures
  • You’ve received ATO attention regarding Division 7A compliance
  • Your current strategy isn’t optimised for changing tax legislation

“The investment in proper tax planning typically pays for itself many times over,” says Peter Williams, an ITP senior partner with 25 years of experience. “We’ve seen clients save $50,000+ annually through strategic extraction planning, while others have avoided six-figure Division 7A penalties through proper compliance.”

Ready to optimise your company money extraction strategy? Contact your nearest ITP office to speak with a qualified company tax specialist who understands the complexities of Australian corporate tax law and can develop a tailored strategy for your situation.

Making Your Company Work for You

Understanding how to properly extract money from your company is crucial for any business owner operating through a corporate structure. While the rules may seem complex, the benefits of getting it right are substantial — both in terms of tax savings and asset protection.

The key to success lies in planning ahead, maintaining proper documentation, and seeking professional advice when needed. With the ATO’s increased focus on Division 7A compliance in 2025, ensuring your money extraction strategy is bulletproof has never been more important.

Whether you’re accessing funds for living expenses, major purchases, or investment opportunities, there’s a legitimate, tax-effective way to do it. The investment in proper planning and compliance will pay dividends for years to come, literally and figuratively.

Remember, your company is one of your most valuable assets. Using it strategically to access funds while building wealth for the future is what smart business ownership is all about.

Other helpful articles: 

Top 2025 Tax Offsets You Might Be Missing in Australia

ATO Hit List 2025: Top Audit Targets This EOFY & How to Stay Compliant

Work Travel Expenses 2025 Tax Return: Complete ATO Guide

Company Tax Rates Australia 2025: Complete Guide

Disclaimer: This article provides general information about company money extraction methods and should not be considered personal tax advice. Division 7A and corporate tax laws are complex and individual circumstances vary significantly. Always consult with a qualified tax professional who can assess your specific situation and provide advice tailored to your business structure and needs. ITP Tax Professionals disclaims any liability for decisions made based solely on the general information provided in this article.

Sole Trader GST

Sole Trader GST Registration Australia 2025: Complete Guide

Quick Summary: GST Registration for Sole Traders

Sole traders must register for GST when their annual turnover exceeds $75,000. However, you can voluntarily register below this threshold to claim GST credits on business purchases. Registration involves charging 10% GST on sales, lodging Business Activity Statements (BAS), and maintaining detailed records for the ATO.

Key thresholds for 2025:

Understanding GST registration is crucial for sole traders as it affects your pricing, cash flow, and compliance obligations. Getting it wrong can result in penalties, back-payments, and administrative headaches that could have been easily avoided.

What is GST and how does it affect sole traders?

Let’s be honest — GST can feel like just another complicated and time-consuming tax-related hassle, especially when you’re juggling everything else as a sole trader. But here’s the thing: it’s actually much simpler than it first appears (trust us).

Goods and Services Tax (GST) is a 10% tax applied to most goods and services sold in Australia. Think of it as becoming a tax collector for the Australian government — but don’t worry, you’re not doing it for free!

When you register for GST, you charge customers an additional 10% on your invoices and send this amount to the ATO through quarterly or monthly Business Activity Statements. The upside? You can claim back GST paid on business purchases, which often makes registration financially beneficial even when it’s not mandatory.

“I always tell my clients to think of GST like a money carousel,” explains Sarah Mitchell, a senior business advisor at ITP. “Money comes in from customers, goes out to suppliers, and you’re just the middleman passing it along to the ATO. The beautiful part is you get to claim back what you’ve paid out.”

The GST system operates on input tax credits — you pay GST on business expenses but claim it back from the ATO, while charging GST on sales. This means GST is ultimately borne by the end consumer, not your business, though it does affect your cash flow timing.

Do sole traders need to register for GST?

Here’s where many sole traders get caught off guard: registration becomes mandatory when your annual turnover reaches $75,000 in any 12-month period. Notice we said “any” 12-month period — not just the financial year.

“We see this all the time,” says Mark Thompson, an ITP business tax specialist with 15 years of experience helping sole traders. “Someone thinks they’re safe because they made $60,000 last financial year, but then they have a bumper few months and suddenly they’ve hit $75,000 over any rolling 12-month period. The ATO doesn’t care which 12 months it is.”

The ATO monitors this threshold carefully, and failure to register when required can result in penalties plus the GST you should have collected. Current penalty units are $330 for infringements occurring on or after 7 November 2024.

Turnover includes all business income before expenses, including GST-free sales, exports, and any government grants or subsidies related to your business activities. It’s calculated on a rolling 12-month basis, not just financial years.

Immediate registration requirements apply to:

“The taxi and ride-share rule catches people by surprise,” notes Lisa Chen, ITP tax advisor who specialises in transport industry clients. “Even if you’re only driving weekends and making $20,000 a year, you still need to register for GST immediately. It’s one of those quirky rules that makes perfect sense to the ATO but confuses everyone else.”

Should I voluntarily register for GST under $75,000?

This is where things get interesting — and where a bit of strategic thinking can save you serious money.

Voluntary GST registration can provide significant cash flow benefits if you purchase equipment, materials, or services that include GST. You can claim input tax credits on these business purchases, potentially saving thousands of dollars annually.

“I had a client who was a freelance graphic designer making about $50,000 a year,” shares David Rodriguez, a senior tax consultant at ITP. “She was hesitant about voluntary GST registration until we calculated she’d spent $8,000 on a new computer and software in one year. That’s $727 in GST she could claim back immediately. The registration paid for itself in month one.”

Benefits of voluntary registration:

  • Claim GST refunds on business purchases including equipment, vehicles, and professional services
  • Claim GST in imported goods
  • Appear more established to potential clients (ABN with GST)
  • Simplified transition when you do exceed the threshold
  • Access to GST-free sales for eligible exports

Drawbacks to consider:

  • Additional administrative burden of BAS lodgement
  • Higher prices may affect competitiveness with non-GST registered competitors
  • Quarterly compliance obligations and record-keeping requirements
  • Potential cash flow impact if customers are slow to pay

When voluntary registration makes sense: If you’re purchasing significant business assets, working with government clients, or planning rapid growth, voluntary registration often pays for itself through input tax credits.

“The sweet spot is usually when you’re spending more than $3,000 a year on GST-inclusive business expenses,” explains Jennifer Walsh, an ITP small business specialist. “Below that, the paperwork probably isn’t worth the refund. Above that, you’re literally leaving money on the table.”

How do I register for GST as a sole trader?

Good news — GST registration is free and can be completed online through the ATO’s Online Services for Business or when applying for an ABN. The process typically takes 10-20 business days for approval.

Required information for registration:

  • Australian Business Number (ABN) — apply simultaneously if you don’t have one
  • Business bank account details for direct debit setup
  • Expected annual turnover for the next 12 months
  • Nature of your business activities and industry classification
  • Preferred BAS lodgement frequency (monthly or quarterly)

Choose your accounting method:

  • Cash accounting: Record transactions when money changes hands (available for turnover under $10 million)
  • Accruals accounting: Record transactions when invoices are issued or received (mandatory over $10 million)

Most sole traders benefit from cash accounting as it simplifies record-keeping and aligns GST obligations with actual cash flow.

“Cash accounting is your friend as a sole trader,” advises Michael Park, ITP business advisor with 20 years of experience. “It means you only worry about GST when money actually hits your bank account, not when you send an invoice. Trust me, your stress levels will thank you for this choice.”

How to calculate and charge GST correctly

Here’s where many sole traders panic unnecessarily. GST calculation is straightforward: multiply your GST-exclusive price by 1.1 to get the total price including GST. For example, a $1,000 service becomes $1,100 with GST ($1,000 + $100 GST).

“I remember one client who spent weeks agonising over GST calculations,” laughs Rebecca Foster, one of our ITP digital business specialists. “She had spreadsheets, calculators, the works. Then I showed her the 1.1 multiply button and she nearly cried with relief. Sometimes the simplest solutions are the best ones.”

Invoice requirements depend on the amount:

  • Under $1,000: Can show total price inclusive of GST with statement “Total price includes GST”
  • Over $1,000: Must show GST amount separately and include your ABN
  • Tax invoices over $82.50: Must include specific elements required by ATO tax invoice guidelines

GST-free vs GST-exempt services:

  • GST-free: Basic food, medical services, education, exports (you can claim input tax credits)
  • Input-taxed: Financial services, residential rent (cannot claim input tax credits)

Understanding this distinction is crucial for sole traders in affected industries, as it impacts both your pricing strategy and input tax credit entitlements.

What are my BAS lodgement obligations?

Business Activity Statements (BAS) must be lodged quarterly or monthly depending on your turnover and payment arrangements. Most sole traders lodge quarterly unless they receive GST refunds regularly or have turnover exceeding $20 million.

Quarterly BAS due dates for 2025:

  • July-September BAS: Due 28 October 2025
  • October-December BAS: Due 28 February 2026
  • January-March BAS: Due 28 April 2026
  • April-June BAS: Due 28 July 2026

“Here’s a pro tip from someone who’s seen too many late penalties,” shares Tony Martinez, ITP compliance specialist. “Set up calendar reminders for two weeks before each BAS due date. Your future self will thank you when you’re not scrambling at 11:59 PM on the due date.”

Your BAS reports:

  • GST collected from customers (Output Tax)
  • GST paid on business purchases (Input Tax Credits)
  • Net GST payable or refund due
  • Other tax obligations like PAYG withholding if you have employees

Late lodgement penalties start at $330 per period and increase based on the delay and your business size. Setting up direct debit arrangements can help avoid late payment penalties.

Your Sole Trader GST Questions Answered

When exactly do I need to register for GST?

You must register within 21 days of reaching $75,000 annual turnover in any 12-month period. The ATO calculates this on a rolling basis, not just financial years, so monitor your income monthly.

Can I deregister from GST if my turnover drops?

Yes, you can deregister when your turnover falls below $75,000 and is expected to stay below that threshold. However, you cannot deregister within 12 months of voluntary registration.

What happens if I don’t register for GST when required?

The ATO can impose penalties plus require you to pay all GST that should have been collected retrospectively. They may also charge general interest charge on unpaid amounts.

Do I need to charge GST on all my services?

Most services are subject to GST, but some are GST-free (like exports) or input-taxed (like financial services). Check the ATO’s guidance for your business type.

How do GST refunds work for sole traders?

If your input tax credits exceed GST collected in a quarter, the ATO will refund the difference. This commonly occurs when purchasing equipment or during business setup phases with high initial expenses.

Can I use simplified GST accounting methods?

Businesses with turnover under $10 million can use cash accounting and may be eligible for other simplifications like annual apportionment for mixed-use assets.

GST Compliance Checklist for Sole Traders

Before registering:

  • Calculate your rolling 12-month turnover accurately
  • Assess whether voluntary registration benefits your business
  • Set up business bank accounts for clear separation
  • Choose appropriate accounting method and BAS frequency

After registration:

  • Update all invoices to include GST and ABN
  • Adjust pricing to account for GST obligations
  • Implement record-keeping systems for GST tracking
  • Set up quarterly BAS lodgement reminders

Ongoing obligations:

Professional Support for GST Compliance

Look, we get it. You started your business to do what you love, not to become a tax expert. GST registration and ongoing compliance can feel overwhelming, particularly when you’re already juggling client work, marketing, and everything else that comes with being a sole trader.

After 50+ years helping Australian businesses, we’ve learned that the most successful sole traders are the ones who know when to ask for help. GST compliance isn’t just about avoiding penalties — it’s about optimising your cash flow and positioning your business for growth.

At ITP, our experienced business tax specialists have helped thousands of sole traders navigate GST registration and ongoing obligations. We understand the challenges facing small business owners and provide practical, cost-effective solutions that actually make sense in the real world.

Our GST services include:

  • Registration assistance and strategic advice
  • BAS preparation and lodgement
  • GST compliance reviews and error correction
  • Record-keeping system setup and training
  • Deregistration guidance when circumstances change

Consider professional help when:

  • Your business involves complex GST scenarios
  • You’re struggling with quarterly BAS obligations
  • The ATO has contacted you about GST compliance
  • You need strategic advice on voluntary registration benefits

“I always tell clients that investing in proper GST advice is like buying good insurance,” explains Peter Williams, one of ITP’s senior tax specialists. “You might not need it every day, but when you do need it, you’re incredibly grateful you have it. The peace of mind alone is worth the investment.”

Ready to ensure your GST obligations are handled correctly? Contact your nearest ITP office to speak with a qualified business tax specialist who understands sole trader challenges and can provide tailored advice for your situation.

Alternatively, if you need help with your individual tax return or want to explore how GST registration integrates with your personal tax strategy, our comprehensive approach ensures all aspects of your financial position are optimised together.

Making GST Work for Your Business

GST registration marks an important milestone in your sole trader journey— it’s like getting your business driver’s license. Sure, there are more rules to follow, but it also opens up new opportunities and legitimises your operation in ways that matter to clients and suppliers.

The key to successful GST compliance lies in understanding your obligations early, implementing robust record-keeping systems, and seeking professional guidance when needed. With proper planning and support, GST registration becomes a stepping stone to business growth rather than a compliance burden.

Whether you’re approaching the $75,000 threshold or considering voluntary registration for its benefits, taking action now ensures you’re properly prepared for this important business milestone. Remember, every successful business owner has been exactly where you are now — wondering if they’re doing things right and hoping they don’t mess up the tax stuff.

The good news? You don’t have to figure it all out alone. Professional help is available, affordable, and designed specifically for business owners like you who want to focus on what they do best while ensuring their tax obligations are handled properly.

Other helpful articles: 

Late or Overdue? How to Lodge a Late Tax Return in 2025 (Even If You’re Years Behind)

Labor’s Election Win: What It Means for Your Taxes in 2025

Tax Deadlines Australia 2025: Key Dates for Your Tax Return

Disclaimer: This article provides general information about GST registration for sole traders and should not be considered personal tax advice. GST laws are complex and individual circumstances vary significantly. Always consult with a qualified tax professional who can assess your specific situation and provide advice tailored to your business needs. ITP Tax Professionals disclaims any liability for decisions made based solely on the general information provided in this article.

2025 tax offsets

Top 2025 Tax Offsets You Might Be Missing in Australia

What You’ll Learn: 6 Tax Offsets That Could Save You Thousands

Tax offsets reduce your tax bill dollar-for-dollar. Here are the key offsets Australian taxpayers often miss in 2024-25:

  1. Small Business Income Tax Offset: Up to $1,000 (sole traders)
  2. Seniors and Pensioners Tax Offset (SAPTO): Up to $2,230 (pension recipients)
  3. Private Health Insurance Offset: 8%-33% of premiums (refundable)
  4. Zone Tax Offset: $57-$1,173 (remote area residents)
  5. Invalid/Carer Offset: Variable (supporting disabled family members)

Plus coming in 2025-26: Potential $1,200 cost-of-living offset and automatic $1,000 work deduction.

With EOFY upon us (as of June 30), it’s crunch time to ensure you’re not leaving money on the table. After helping thousands of Australians maximise their tax returns, we’ve seen how often people miss out on legitimate tax offsets simply because they don’t know they exist.

Unlike tax deductions that reduce your taxable income, tax offsets directly reduce the tax you owe, dollar for dollar. That makes them incredibly powerful, especially when you qualify for multiple offsets!

Let’s explore the tax offsets available right now, plus what’s coming in 2025-26 that could change your tax strategy.

1. Small Business Income Tax Offset: The Forgotten $1,000

Running your own business means juggling countless responsibilities, and it’s easy to overlook opportunities that put money back in your pocket. This offset is specifically designed for hardworking sole traders, freelancers, and contractors — people who’ve taken the leap into business ownership and deserve recognition for contributing to Australia’s economy.

Maximum benefit: $1,000 per year

Who qualifies: Sole traders and some individuals with net small business income

Calculation: 16% of your net small business income (capped at $1,000)

This is one of the most overlooked offsets, especially valuable for sole traders, freelancers, and contractors. The small business income tax offset applies to individuals who operate as sole traders or receive income from small business partnerships or trusts. 

Who benefits:

  • Sole traders with business income
  • Partners in small business partnerships
  • Beneficiaries of small business trusts
  • Freelancers and contractors operating as individuals

Example: If your net small business income is $6,250 or more, you get the full $1,000 offset (16% x $6,250). Even with $3,000 in business income, you’d get a $480 offset.

Important note: Your business must qualify as a small business entity (generally under $5 million annual turnover). 

2. Seniors and Pensioners Tax Offset (SAPTO): Major Relief for Retirees

After decades of hard work, you shouldn’t have to stress about tax bills eating into your pension. The government recognises this with SAPTO, which can dramatically reduce or even eliminate your tax liability entirely. Many eligible seniors don’t realise they’re missing out on this significant relief that’s designed specifically for people in their situation.

Maximum benefit: $2,230 for singles, $1,602 for couples (each)

Who qualifies: Recipients of eligible Australian Government pensions/allowances

Application required: None – calculated automatically if eligible

SAPTO can eliminate or significantly reduce tax for eligible seniors. The ATO’s SAPTO guidelines show this offset applies to various government payments. 

Eligible payments include:

  • Age Pension
  • Disability Support Pension
  • Carer Payment
  • Veterans’ pensions and allowances 

Income thresholds for 2024-25:

  • Singles: Full offset if rebate income is under $34,919, phases out at $52,759
  • Couples: Full offset if rebate income is under $30,994 each, phases out at $43,810

Spouse transfer benefit: Unused SAPTO amounts can automatically transfer between eligible spouses.

Example: John, 68, receives Age Pension with $25,000 rebate income. He gets the full $2,230 SAPTO, potentially eliminating his tax liability entirely. 

3. Private Health Insurance Offset: The Refundable Opportunity 

Paying for private health insurance already feels like a big expense, but here’s some good news — the government helps offset those costs through a rebate that can put real money back in your pocket. What makes this particularly attractive is that it’s one of the few tax benefits you can receive even if you don’t owe any tax.

Maximum benefit: Up to 32.812% of premium costs

Who qualifies: Private health insurance holders meeting income thresholds

Special feature: Refundable — you can get money back even with no tax liability

This is one of the few refundable offsets, meaning you can receive money even if you don’t owe tax (you can take it as a reduced premium throughout the year or a refundable offset when you lodge your tax return). The private health insurance rebate varies by age and income.

Income thresholds for 2024-25:

  • Singles: Up to $97,000 (rebate 8.202%-32.812%)
  • Families: Up to $194,000 (plus ~$1,500 per dependent child)

For more info see this ATO page explaining the income thresholds. 

Two claiming methods:

  1.  Premium reduction: Insurer reduces your premiums during the year, OR
  2. Tax return: Claim full rebate when lodging

Pro tip: If you chose premium reduction but earned less than expected, you might get additional money back at tax time.

4. Zone Tax Offset: Remote Area Recognition 

Living in remote Australia comes with unique challenges and costs that city dwellers simply don’t face. The government acknowledges this through the zone tax offset, providing some financial recognition for the extra expenses and isolation that come with living in regional and remote areas.

Maximum benefit: $57 (Zone B) to $1,173 (Special Areas)

Who qualifies: Residents of designated remote areas for 183+ days

Important change: FIFO workers no longer eligible unless residence is also zoned

The zone tax offset recognises the additional costs of living in remote Australia.

Zone types and amounts:

  • Zone A: $338 base amount
  • Zone B: $57 base amount
  • Special Areas: $1,173 base amount (plus potential dependent amounts)

Key requirement: Your usual place of residence (not just work location) must be in the designated zone for at least 183 days.

Check eligibility: Use the ATO’s Australian zone list to verify your location.

5. Invalid and Invalid Carer Offset: Support for Caregivers

Caring for a family member with a disability is both emotionally and financially demanding. This offset provides some financial recognition for the vital role carers play, acknowledging that supporting a loved one often comes with significant personal and financial sacrifices.

Benefit amount: Variable (use ATO calculator)

Who qualifies: Supporting invalid/carer (16+) receiving government payments

Income limit: Adjusted taxable income under $117,194 (2024-25)

This lesser-known offset supports people caring for family members with disabilities. The invalid and invalid carer offset has specific eligibility criteria.

Eligible relationships:

  • Spouse who is invalid or cares for invalid
  • Parent (or spouse’s parent) who is invalid/carer
  • Child, brother, sister (16+) who is invalid

Required government payments: Disability Support Pension, Carer Payment/Allowance, Invalidity Service Pension.

What’s Coming in 2025-26: New Opportunities

Tax policy is constantly evolving, and there are some exciting changes on the horizon that could put even more money back in your pocket. While some of these are still proposals rather than locked-in law, it’s worth understanding what might be coming so you can plan ahead and make the most of these potential opportunities.

Automatic $1,000 Work Deduction (2026-27)

From July 2026, every working Australian may get an automatic $1,000 deduction for work expenses — no receipts required. You can still claim more with proper documentation.

Additional Tax Cuts 

  • July 2026: Bottom tax rate drops from 16% to 15%
  • July 2027: Further reduction to 14%

These changes continue the trend toward lower taxes for middle and lower-income earners.

Action Checklist Before June 30, 2025

With EOFY now here, there are still moves you can make to maximise your tax position. Some opportunities have hard deadlines, while others are worth reviewing with a tax professional who can spot combinations and strategies you might miss on your own.

Immediate actions:

  • Review private health insurance rebate method
  • Confirm small business status if you’re a sole trader
  • Check zone classification for remote area offsets

For tax professionals to review:

  • SAPTO eligibility if you’re a senior/pensioner
  • Invalid/carer offset if supporting family members
  • Combining multiple offsets for maximum benefit
  • 2025-26 planning for proposed changes

Why Professional Help Matters

Tax offsets involve complex eligibility rules, income thresholds, and timing requirements. The interaction between different offsets and changing tax laws means help from a professional tax accountant can identify opportunities you might miss!

At ITP, we specialise in maximising tax outcomes for Australians across all income levels and situations. Our experienced tax professionals understand how to:

  • Identify all available offsets for your specific circumstances
  • Optimise timing of contributions and claims
  • Navigate complex eligibility rules for specialised offsets
  • Plan for future changes in 2025-26 and beyond

This expertise is particularly valuable if you have multiple income sources, complex family situations, operate a small business, or live in remote areas.

Don’t leave money on the table. Book a consultation with ITP to ensure you’re claiming every offset available, or explore our comprehensive tax return services to maximise your tax outcome this season.

For small business owners, our small business tax services can help you navigate both business deductions and personal offsets for optimal tax planning.

Frequently Asked Questions About 2025 Tax Offsets

What’s the difference between tax offsets and deductions?

Tax deductions reduce your taxable income, while offsets directly reduce your tax bill dollar-for-dollar, making offsets generally more valuable.

Can I claim multiple offsets?

Yes, you can claim all offsets you’re eligible for. They work together to reduce your total tax liability.

Are offsets refundable?

Most offsets are non-refundable (can only reduce tax to $0). However, the private health insurance offset is refundable.

How do I know if I live in a remote zone?

Check the ATO’s zone list tool using your postcode.

Is there a low income tax offset for 2025?

Not anymore, unfortunately. According to the ATO, the: “LMITO [is] not available [from the] 2022–23 income year onwards Low and middle income tax offset (LMITO) ended on 30 June 2022. This means it doesn’t apply for the 2022–23 income year. Your tax return outcome may be different this income year. You may have a lower refund (less than when LMITO was available) or you may receive a tax bill. See Why your tax return outcome may change in 2023.”

This means that for every year since the 2021-22 financial year, you’ve not been able to claim the low and middle income tax offset.

Disclaimer: This article provides general information only and is not intended to replace professional tax advice for your specific situation. Tax policies and laws change regularly, and individual circumstances vary significantly. The information contained in this article is based on current tax laws and ATO guidance as at June 2025, but tax legislation and interpretations can change. Before making any financial decisions or claiming tax offsets, you should consult with a qualified tax professional who can assess your individual circumstances and provide advice tailored to your specific situation. ITP Tax Professionals disclaim any liability for decisions made based solely on the general information provided in this article.

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