Freelancers in Australia can reduce the tax they pay by claiming valid business deductions. These deductions lower your taxable income.
You must only claim expenses that directly relate to earning your income. Personal or private costs are not deductible. You must keep records to support every claim.
In 2025, the ATO continues to closely review freelancer deductions, especially home office, phone, internet, and vehicle claims.
Claiming too much or too little can both cost you money. Understanding what you can claim, and how to claim it correctly, helps you stay compliant and avoid unnecessary stress.
Why Freelancers Get Tripped Up on Deductions
If you’re freelancing in Australia, chances are you’ve asked yourself:
“Can I claim this?”
Laptop? Probably.
Coffee while working? Maybe.
That new phone you sometimes use for clients? Now it gets tricky.
Understanding tax deductions is one of the biggest challenges freelancers face, especially when you’re juggling clients, invoices, GST, and actually doing the work that earns you money. The ATO expects you to “just know” the rules, but let’s be honest: they’re not always intuitive.
What Are Tax Deductions and Why Do They Matter?
Tax deductions reduce your taxable income, which means you pay less tax overall. Simple idea, complex execution.
To be deductible under ATO rules, an expense must:
- Be directly related to earning your income
- Not be private or domestic in nature
- Be supported by records or receipts
Pro Tax Tip: If you wouldn’t have bought it without your freelance work, it’s more likely to be deductible.
Which Tax Deductions Can Freelancers Commonly Claim?
Let’s break this into real, practical categories:
Home Office Expenses
If you work from home (and most freelancers do), you may be able to claim:
- Electricity and internet (business portion)
- Phone usage
- Depreciation on office furniture
- Rent or mortgage interest (partial, carefully calculated)
The ATO allows different calculation methods, so choosing the right one matters.
Tools, Software, and Equipment
- Laptops and monitors
- Adobe, Figma, Xero, MYOB subscriptions
- Cloud storage and cybersecurity tools
Assets over $300 are usually depreciated over time.
Vehicle and Travel Expenses
- Client meetings
- Work-related site visits
Commuting from home to your usual work location is not deductible, a common ATO red flag.
Pro Tax Tip: If you’re mixing business and personal use, only claim the business percentage, and keep evidence.
How Do GST and Deductions Work Together in 2025?
If your business turnover reaches $75,000 or more, registering for Goods and Services Tax (GST) is mandatory in Australia.
This requirement applies to sole traders, partnerships, companies, and trusts once your annual sales exceed this threshold.
Failing to register on time can lead to penalties and interest charges, so it’s important to stay on top of your GST obligations.
Key GST Reminders for 2025:
- GST Rate Remains 10%
The GST rate in Australia is still 10%, meaning you need to charge this on most goods and services sold. Whether you’re issuing invoices or receiving payments, including GST correctly ensures compliance and avoids issues during audits. - Claiming GST Credits on Business Purchases
Registered businesses can claim GST credits on purchases made for business use. This means that the GST you pay on office supplies, software, equipment, or other business-related expenses can be offset against the GST you collect from your sales, reducing your net GST payable. Remember, proper records and tax invoices are essential to support these claims. - BAS Lodgement: Correct and Timely
The Business Activity Statement (BAS) is how you report and pay your GST to the ATO. Lodging BAS correctly and on time is crucial to avoid penalties and interest. Whether you report quarterly or monthly, double-check your figures, reconcile GST collected and claimed, and submit before the deadline.
Tip: Even if you’re new to GST or unsure about the rules, staying organised, keeping detailed records, and understanding your obligations can save you headaches and potential fines down the track.
Real-Life Scenarios You Might Face
Scenario 1: The Over-Claiming Freelancer
Meet Jane, a talented freelance graphic designer. When it came to her tax return, she confidently claimed 100% of her phone, internet, and even home office rent as business expenses. On paper, it looked impressive, but there was a problem: she had no usage logs or proper apportionment to back up her claims. This is a common trap for freelancers who work from home; the ATO expects a reasonable allocation between personal and business use.
The ITP Solution:
Our team carefully reviewed Jane’s expenses, adjusted the claims to reflect actual business use, and applied correct apportionment calculations. We made sure every deduction was fully compliant with ATO guidelines.
The Outcome:
By fixing over-claims before submission, Jane avoided potential penalties, navigated the ATO review without stress, and ultimately saved $3,200 in taxes. She got peace of mind knowing her return was accurate and defensible.
Scenario 2: The Under-Claiming Sole Trader
Then there’s Tom, a sole trader consultant who was overly cautious with his tax return. He claimed almost nothing, fearing audits or mistakes. While this might seem safe, it actually meant he was paying far more tax than necessary, and leaving cash on the table.
The ITP Solution:
We worked with Tom to identify missed deductions, including legitimate business expenses and GST credits. We guided him on proper documentation and record-keeping, ensuring every claim was supported and compliant.
The Outcome:
The result? Tom received a $6,500 tax refund, dramatically improving his cash flow. By claiming what he was entitled to, he could reinvest in his business, reduce financial stress, and approach future tax seasons with confidence.
Key Takeaway:
Whether you’re over-claiming or under-claiming, proper guidance is crucial. Correct deductions mean more savings, fewer headaches, and a stress-free ATO review. ITP Accounting ensures freelancers and sole traders pay what’s fair, and no more.
Pro Tax Tip: Paying too much tax is just as costly as paying too little, the ATO won’t refund “voluntary overpayments” unless you claim correctly.
What About Super, Medicare Levy, and Other Obligations?
As a freelancer, you’re responsible for planning ahead.
2025 Key Figures (Australia)
- Medicare Levy: 2% of taxable income for most taxpayers. Lower-income earners may be eligible for a reduction or exemption, and an additional Medicare Levy Surcharge (MLS) may apply to high-income earners without private hospital cover.
- Super Guarantee: 12% (if you employ others)
- Personal tax rates: Progressive, based on income thresholds
Super isn’t mandatory for sole traders, but skipping it can hurt long-term wealth.
What Records Should Freelancers Keep?
ATO record-keeping rules require:
- Receipts (digital is fine)
- Invoices issued and received
- Bank statements
- Mileage or usage logs
The ABS highlights that poor record-keeping is a major cause of small business failure.
Pro Tax Tip: If the ATO audits you, good records turn panic into paperwork.
Your Next Moves: Staying Smart with Tax
If you’re freelancing without a clear tax strategy, you’re reacting — not planning.
Smart freelancers:
- Review deductions quarterly
- Separate business and personal finances
- Get advice before lodging, not after
Frequently Asked Questions
Can freelancers claim coffee or meals?
Only if you’re travelling away from home for work, everyday meals aren’t deductible.
Do I need to register for GST?
Yes, if turnover reaches $75,000 in any 12-month period.
Can I claim clothing?
Only protective or branded workwear, not everyday clothes.
What happens if I make a mistake?
Corrections are possible, but penalties apply for repeated or careless errors.
Is accounting software deductible?
Yes, if used for your freelance business.
Do freelancers need an accountant?
Legally no. Practically, it often pays for itself.
Ready to Get Your Freelancer Tax Sorted?
Freelancer tax deductions can quickly become confusing, especially when you’re balancing GST, home office claims, super planning, and ATO compliance all at once. Guessing or leaving it until the last minute can cost you more than you realise
Take the stress out of tax time and feel confident about your numbers. Book a consultation with an ITP Accounting Professional today and find your nearest office.
More Helpful Articles:
Tax Calculator Australia 2025: Why It’s Still the Easiest Way to Estimate Your Refund
Working From Home Tax Claims 2025: Are You at Risk of an ATO Review?
Top 2025 Tax Offsets You Might Be Missing in Australia
Disclaimer: This blog is for general informational purposes only and does not constitute professional tax advice. Tax law is complex and subject to change. Consult a qualified tax adviser or the ATO for guidance specific to your circumstances.