Australian tax basics

Disclaimer: This is not tax advice. It’s just directional guidance. Confirm with your accountant in full before making decisions. It gives you a flavour of what goes on here.

Most groan about paying tax, but running a cash flow positive digital business is a good way to recoop some of your costs as long as they are valid and related expenses.

Think about it:

• That Macbook Pro - Deductable if it’s used to run your business
• The internet - Deductable for the business use portion.
• Online courses and learning - Deductable if work related.
• AI software and tools - deductable for the business use portion.

What this looks like compared to PAYE

This is just as an illustration - real figures depend on actual deductions and tax offsets but you get the idea.

The tax system is horrendously ‘progressive’ - meaning the more you get paid - the more you pay (2024–25)

One thing to remember is, if you are on the higher tax rates via a PAYE employment job and you start a side hussle - the tax rate on that will be treated as additional income at the tax bracket it falls into. That means if you’re on a high income 45% of it is going going to go to the government unless you can add costs.

If you earn more than $75,000 in business revenue a year, you must register for GST and charge 10% GST on most sales. But if you pay for goods you can get a GST credit on GST you’ve paid.

Things you can generally deduct

(please talk to an accountant here - this is directional only)

The ATO allows deductions that are:

• Directly related to earning your income
• Not of a private or domestic nature (or at least clearly split)
• Properly documented

Tier 1: Obvious business expenses

• Laptop, computer, monitor, mouse, keyboard
• Business use software (e.g. Adobe CC, Canva Pro, ChatGPT)
• Internet and mobile (business portion only)
• Camera gear for content creators
• Web hosting, domain registration, platform subscriptions

Depreciation rules may apply if the item costs more than $1,000 (instant asset write-off thresholds can vary by year and government policy—check the current ATO guidance).

Tier 2: Mixed use and home office

Home office deductions (only for actual business use):

• ATO fixed rate method for running expenses
• Alternatively, claim percentage of internet, electricity, and rent (but keep records)

Phone, internet, and subscriptions:

• Can be partially deductible based on actual business use
• Must keep a 4-week log every year to justify claims

Tier 3: Education, development and travel

• Online courses or conferences related to your current business = deductible
• Books, coaching, masterminds, if clearly relevant to income
• Travel for business (e.g., filming, client work, events)—keep a log
• Meals with clients? Deductible if it’s directly tied to generating income (e.g., pitch lunch)

What you can't claim:

• Personal expenses disguised as business (ATO takes this seriously)
• Clothing (unless it’s a uniform or branded costume for filming)
• Entertainment or fines
• Travel with no clear business purpose

How to structure your records in Australia

Your tax-ready system

• Take photos of receipts (ATO accepts digital copies)
• Keep a separate business bank account
• Use Google Drive or Dropbox to backup documentation

Example Folder System:

├── Invoices/
├── Receipts/
├── Bank Statements/
├── Home Office Logs/
└── Notes (Business purpose, travel, etc.)

Paying your tax as a sole trader

• You’re taxed as an individual, not a company
• You can register for a PAYG Instalment Plan to pay tax quarterly
• If you don’t—save 25–30% of income to cover tax and avoid surprises

Key dates (2024–25):

Advanced things you can look into

Income splitting (if you hire family)

• You can pay a spouse or child for genuine business work (must be fair market rates)
• Must be able to prove the work was real
• Payslips, timesheets, and bank transfers are essential

Remember though, they may need a sole trader ABN to be able to pay them - or you might be up for other compliance measures (payment of super etc). This can get messy.

Retirement contributions

• You can make personal superannuation contributions and claim a deduction
• Great for reducing taxable income
• Must notify the fund and lodge the right form with the ATO

R&D tax incentives (for startups)

• If developing software, AI models, or new tech, you might qualify
• Must be registered with AusIndustry and meet eligibility requirements

Conclusion

One of the worst things you can do is 1) assume anything. 2) not meet records requirements. 3) not keep the right documentation and 4) get into an audit situation.

Perhaps the easiest way to reduce the probability of problems is get a proper, licensed and certified accountant and keep great records. It will make the job easy for them, and keep the tax man happy.

• You don’t need to “game” the system—you just need to understand the rules
• The ATO is more digital and more data-driven than ever. Don’t assume they won’t ‘find it’. They have access to your bank account.
• If in doubt, check the ATO’s official website or speak to a tax agent

Rules change ALL the time. What’s written could change at a moments notice.