Tax deductions for freelancers this EOFY

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The R&D tax incentive is one of the biggest sources of funding for Aussie startups, so we were closely watching last night’s budget for rumoured changes to it.  The result?  Read all about it in this Budget 2018 for startups breakdown.

We know what you’re like. You’ve been carefully saving receipts all year and now that it’s almost tax time, you’re ready to cash in and make use of all those tax deductions for freelancers you’ve meticulously researched.

Actually … in the famous words of Sweet Brown: “Ain’t nobody got time for that.”

Especially when it often seems like the tax deductions freelancers can claim are more effort than they’re worth, like going through your phone bill to figure out which calls were business versus personal.

The good news is, there are some tax deductions for freelancers that you might not be aware of or some you don’t quite have your head around yet. The great news is: they’re all explained in this blog for you.

1. Your website

If you have a website, there’s a good chance you can claim some of the costs associated with it as a deduction through your tax return. That includes both one-off and ongoing costs, in the year that you incur them. So if you’ve paid bills for website hosting, domain names or website development, let your accountant know.

2. Buy new (or secondhand) stuff now

Do you need a new laptop, phone, tools or other equipment? Now might be a good time to buy them, thanks to an extension the Australian government announced in its 2017 budget allowing small businesses and sole traders to claim tax deductions on equipment or assets.

The rules are that you need an active ABN, annual turnover of less than $10 million and each piece of equipment or asset that you want to claim a deduction on must cost less than $20,000 (either new or second hand). You’ll need to get in quick though because the extension ends with this financial year on 30 June 2018.

3. Prepaying your expenses

When it comes to tax deductions for freelancers, this one is often overlooked. You can prepay business expenses, like subscriptions, travel, training, rent, phone, internet or insurance up to a year in advance AND claim a tax deduction on them.

4. Bad debts

We hope this doesn’t happen to you but if someone doesn’t pay for your services, you might be able to claim a tax deduction on their unpaid bill. Your accountant can explain how to document it properly so you can claim it in your tax return, making it hurt just that little bit less every time you think about it.

5. Insurance

You can claim a tax deduction for insurance premiums on policies that protect against loss of income. Like the appropriately named, income protection insurance (also known as a salary continuance policy). You can’t claim the costs of life, trauma or critical care insurance though.

6. Personal super contributions

As a freelancer, if you’re paying your own super there’s a good chance you can claim a tax deduction on it up to $35,000 in annual payments. The ATO explains this more and don’t forget to read the part about notifying your fund before you claim the deduction. This is a must.

7. Your accountant

Yes, in a beautiful circle of tax harmony, you can claim a deduction on your accountant’s fees in your tax return. Now that’s taxy.

Other tax deductions for freelancers

And then there are all the tax deductions for freelancers that you are probably already aware of but just in case, here’s a quick list:

  • Home office expenses, such as a percentage (sorry, not all) of your rent or mortgage, mobile phone bill and utility bills including internet. Try using the ATO’s nifty home office expenses calculator
  • Other home office expenses, such as stationery
  • Vehicle expenses such as fuel and maintenance costs, as long as you own the car and the travel is part of your working day (excluding driving to and from work), such as driving to visit clients or special trips to the post office or bank
  • Gifts to clients
  • Donations of $2 or more
  • Study, courses or seminars

The ATO has more info on all of these too.

And of course you need to have receipts for everything you claim, which almost goes without saying but we said it so now we’ll just move on and say, thank you for reading.

But before you go, we need to let you know that this blog post is general in nature. It’s not personal tax advice. If you would like that, please get in touch with our resident tax expert, Michael Budnow. He’d love to help!

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