Sole Trader Expenses: Business vs Private Use

Quick answer

Sole traders can generally claim expenses that relate to earning business income.

But private expenses are not deductible.

If an expense is partly business and partly private, you usually need to claim only the business-use portion.

That sounds simple.

Then real life arrives with one phone, one car, one laptop, one home internet plan, and a business run from the kitchen table.

Excellent. Now we have a tax problem with Wi-Fi.

GoTax helps sole traders, ABN workers, contractors, freelancers and self-employed Australians complete tax returns online, with returns checked by registered tax agents before lodgement.

Start your self-employed tax return online with GoTax

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Why business vs private use matters

Business deductions are not based on what you bought.

They are based on why you bought it and how you used it.

A laptop can be business.

A laptop can be private.

A laptop can be 60% business and 40% Netflix, emails, footy scores and online shopping.

Same item.

Different tax result.

That is why sole traders need to separate:

• business use

• private use

• mixed use

• unsupported use

• wishful thinking

The first three can be handled.

The last two are best left out of the return.

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The basic rule for sole trader expenses

The basic rule is:

Claim the business part. Do not claim the private part.

For example:

Expense	Business use	Private use	Potential claim
Phone plan	40%	60%	40%
Internet	50%	50%	50%
Laptop	70%	30%	70%
Car	65%	35%	65%
Software	100%	0%	100%
Family holiday	0%	100%	0%

That last one is a shame.

But “I answered a business email from the hotel” does not turn the family holiday into a business conference.

Nice try.

No.

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What counts as a business expense?

A business expense is generally a cost connected to earning your sole trader or ABN income.

Common sole trader expenses may include:

• tools

• equipment

• materials

• software

• subscriptions

• phone

• internet

• home office costs

• car expenses

• website costs

• advertising

• insurance

• stationery

• accounting fees

• tax agent fees

• platform fees

• payment processing fees

• training

• protective clothing

• business bank fees

• contractor costs

• professional memberships

• licences

• registration costs

But the expense still needs to fit your business.

A graphic designer may claim design software.

A cleaner may claim cleaning supplies.

A rideshare driver may claim business car expenses.

A dog groomer claiming a gaming console may need a very good explanation.

Probably several.

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What is private use?

Private use is personal use.

It is the part of the expense that relates to your ordinary life, not the business.

Private use can include:

• family internet use

• personal phone calls

• private driving

• streaming services

• personal clothing

• groceries

• school expenses

• home furniture used privately

• holidays

• meals not connected to business travel

• entertainment

• gym memberships

• personal grooming

• household bills not connected to business use

Having an ABN does not convert private life into a business deduction.

An ABN is not a magic wand.

It is more like a spotlight.

The ATO can see more, not less.

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Mixed-use expenses

Mixed-use expenses are where many sole traders get into trouble.

These are expenses used partly for business and partly privately.

Common mixed-use expenses include:

Expense	Why it is mixed
Phone	Business calls and private calls
Internet	Business work and household use
Car	Business trips and private driving
Laptop	Business work and personal use
Tablet	Client work and personal browsing
Home office	Business use and household use
Electricity	Work area and general home use
Software	Business and personal projects
Camera	Client work and private photos
Tools	Paid jobs and home projects

For mixed-use expenses, the question is:

What percentage genuinely relates to the business?

Not:

What percentage would make the refund look better?

Different question.

Very different answer.

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Example: phone used for business and private calls

Sophie is a sole trader.

She pays $1,200 for her phone plan during the year.

She uses the phone for:

• client calls

• supplier messages

• bookings

• business emails

• private calls

• family messages

• personal internet use

After checking her usage, she estimates 45% is business-related.

Potential claim:

$1,200 × 45% = $540

She does not claim the full $1,200.

That would be claiming the private part.

The ATO may be many things.

Generous with private phone bills is not usually one of them.

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Example: internet used by the household

Tom runs a small ABN business from home.

He pays $960 for home internet during the year.

The internet is used by:

• Tom’s business

• Tom privately

• his partner

• the kids

• streaming services

• schoolwork

• general household use

He calculates that 35% relates to business use.

Potential claim:

$960 × 35% = $336

The other 65% is private.

Sadly, the teenager gaming upstairs is not part of the business model.

Unless the business is “providing free Wi-Fi to teenagers”.

Which is not ideal commercially.

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Example: laptop used for business and private use

Amelia buys a laptop for $1,800.

She uses it for:

• freelance work

• invoicing

• client emails

• design projects

• online banking

• personal browsing

• streaming

• family use

She calculates business use at 70%.

Potential business-use portion:

$1,800 × 70% = $1,260

The tax treatment may still depend on whether the cost is claimed outright or depreciated, depending on the rules and facts.

But the key point remains:

Only the business portion is relevant.

Private use must be stripped out first.

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Example: car used for business and private driving

Car expenses are one of the biggest mixed-use areas.

A sole trader may use one car for:

• client visits

• job sites

• business deliveries

• buying supplies

• quoting jobs

• family driving

• groceries

• school drop-offs

• weekend travel

You need to separate business kilometres from private kilometres.

That may involve:

• logbook records

• odometer readings

• app records

• job sheets

• delivery records

• appointment records

• client invoices

• work diary entries

If you use your car for ABN work, read the GoTax guide: Can I Claim My Car With an ABN?

If you need to compare car methods, read: Logbook vs Cents per Kilometre 2026

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Contractor expenses: business or private?

Contractors often have mixed-use expenses.

Common contractor expenses may include:

• tools

• work equipment

• phone

• internet

• vehicle use

• protective gear

• software

• professional registrations

• training

• subscriptions

• insurance

• accounting fees

But contractors need to be careful.

If an expense is really private, it does not become deductible just because contract income exists.

Example:

A contractor uses a mobile phone for client calls and private calls.

Only the business portion should be claimed.

Example:

A contractor buys tools used for paid work and private weekend projects.

Only the business portion should be claimed.

Example:

A contractor drives from home to the same site every day.

That travel may still be private depending on the facts.

Tax law loves facts.

It is less impressed by vibes.

Contractors can start here: Contractor Tax Return

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Freelancer expenses: business or private?

Freelancers also face mixed-use traps.

Common freelancer expenses may include:

• laptop

• software

• phone

• internet

• home office

• website costs

• subscriptions

• camera gear

• design tools

• professional memberships

• training

• marketing

• payment platform fees

Some expenses may be 100% business.

Others may be partly private.

Example:

A freelance designer pays for design software used only for client work.

That may be business use.

Example:

A freelancer buys a laptop used for client work and personal browsing.

That is mixed use.

Example:

A freelancer claims all home internet because “the business needs internet”.

That may be too much if the household also uses it privately.

The business may need internet.

So does everyone watching Netflix.

The tax return needs to know the difference.

Freelancers can use: Freelancer Tax Return

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Small business expenses: common traps

Sole trader small businesses often get into trouble with expenses that feel business-like but are actually partly or fully private.

Common traps include:

Expense	Trap
Clothing	Ordinary clothing is usually private
Meals	Eating during the workday is usually private
Car	Private travel included in business claim
Phone	Claiming 100% without business-use support
Internet	Ignoring household use
Home office	Claiming household costs without proper basis
Tools	Private use not removed
Equipment	Business-use percentage not calculated
Training	Course not connected closely enough to business
Gifts	Not genuinely business-related
Travel	Holiday mixed with business purpose

A receipt is not enough by itself.

You also need the business connection.

A receipt proves you bought something.

It does not prove the ATO should help pay for it.

Use the GoTax Small Business Tax Return page if you run a sole trader business.

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Records you should keep

If you claim sole trader expenses, keep records that show:

• what you bought

• when you bought it

• how much it cost

• who supplied it

• how it relates to the business

• what percentage was business use

• how the percentage was calculated

• whether any private use was removed

Useful records include:

• receipts

• tax invoices

• bank statements

• credit card statements

• supplier invoices

• app reports

• platform statements

• logbooks

• odometer readings

• usage diaries

• phone bills

• internet bills

• calendar entries

• job sheets

• client records

• work diaries

• home office calculations

A bank statement can help.

But it may not be enough on its own.

“Bunnings $286” might be business materials.

It might also be a barbecue cover, garden hose and three things you did not know you needed until you entered Bunnings.

Context matters.

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How to calculate business-use percentage

There is no single method that fits every expense.

You need a reasonable basis.

Examples:

Expense	Possible basis
Phone	Itemised bill or business/private call estimate
Internet	Time used for business compared with household use
Car	Logbook or business kilometre records
Laptop	Business-use diary or reasonable usage estimate
Home office	Work hours and area used
Software	Whether used only for business or mixed use
Equipment	Business jobs compared with private use
Camera	Client shoots compared with private use

The key is to be reasonable and consistent.

Do not reverse-engineer the percentage from the refund you want.

That is not apportionment.

That is tax astrology.

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Business bank account or personal bank account?

A separate business bank account is not always legally required for a sole trader.

But it is usually sensible.

Why?

Because it makes it easier to separate:

• business income

• private income

• business expenses

• private spending

• tax savings

• GST, if registered

• transfers to yourself

• cash flow

If all income and expenses run through one personal account, your records can become messy quickly.

Messy records create missed deductions.

They also create suspicious-looking deductions.

Neither is ideal.

If you are not sure where to start, read: Do I Need a Business Bank Account for My ABN?

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What you should not claim

Do not claim expenses that are clearly private.

Examples usually include:

• groceries

• normal household food

• private rent

• ordinary clothing

• entertainment

• family holidays

• private school costs

• gym memberships

• private medical costs

• personal grooming

• personal travel

• fines

• private streaming services

• household furniture not used for business

• family mobile phones

• private insurance

• hobby expenses

Some expenses may have limited exceptions depending on the business.

But do not stretch the rules until they squeak.

That is not tax planning.

That is noise.

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What if something is partly business?

If something is partly business, do not panic.

Just calculate the business portion.

Example:

Item	Total cost	Business use	Claim
Phone	$1,200	40%	$480
Internet	$960	35%	$336
Laptop	$1,800	70%	$1,260 business-use portion
Car costs	$8,000	60%	$4,800
Software	$600	100%	$600

The calculation does not need to be dramatic.

It needs to be supportable.

A good sole trader tax return is not necessarily the one with the biggest deductions.

It is the one where the deductions make sense.

Preferably before anyone asks.

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How GoTax helps

GoTax helps sole traders and ABN workers complete tax returns online.

The system prompts you through business income and deduction areas, and your return is checked by registered tax agents before lodgement.

That can help with common issues like:

• mixed-use expenses

• car claims

• home office claims

• phone and internet apportionment

• freelancer expenses

• contractor deductions

• private-use adjustments

• business record questions

• ABN income reporting

• tax agent fee claims

GoTax does not turn private costs into business deductions.

It helps you claim what you are entitled to claim properly.

That is better.

Less exciting, but better.

Start your self-employed tax return online with GoTax

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Quick checklist before claiming sole trader expenses

Before lodging, ask:

• Did I actually incur the expense?

• Was it connected to earning business income?

• Was any part private?

• Did I remove the private portion?

• Do I have a receipt, invoice or record?

• Can I explain the business-use percentage?

• Does the claim match my business activity?

• Have I avoided claiming ordinary private costs?

• Have I kept car records where needed?

• Have I kept home office calculations where needed?

• Are my bank records and invoices consistent?

• Am I using the right GoTax return type?

If you can answer those properly, you are in better shape.

If not, fix the records before the return goes in.

The ATO is much easier to deal with before it starts asking questions.

Funny how that works.

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Frequently asked questions

Can sole traders claim business expenses?

Yes. Sole traders may be able to claim expenses connected to earning business income, provided the expenses are allowable and records are kept.

Can I claim private expenses if I have an ABN?

No. Having an ABN does not make private expenses deductible.

What if an expense is partly business and partly private?

You generally claim only the business-use portion. The private part should be excluded.

Can I claim 100% of my phone?

Only if it is genuinely used 100% for business and you have records to support that. Most sole traders have some private phone use.

Can I claim my home internet as a sole trader?

You may be able to claim the business-use portion of your internet, but household and private use must be removed.

Can I claim my laptop as a business expense?

You may be able to claim the business-use portion of the laptop. The treatment may depend on the cost, use and applicable deduction rules.

Can I claim meals as a sole trader?

Ordinary meals during the workday are usually private. Some travel or specific business situations may be different, depending on the facts.

Do I need receipts for sole trader expenses?

Yes, you should keep receipts, invoices, bank records and other evidence that supports both the expense and its business use.

Can GoTax help with sole trader deductions?

Yes. GoTax helps sole traders, self-employed workers and ABN workers complete tax returns online, with returns checked by registered tax agents before lodgement.

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About the Author

Written by Mark Walmsley, Chartered Accountant and Registered Tax Agent.

GoTax helps Australians complete their tax returns online, with returns checked by registered tax agents before lodgement.

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General Information Disclaimer

This article provides general information only and does not take into account your personal circumstances. Tax law can change and deduction eligibility depends on your income, business activity, expenses, private use, records and specific facts. If you are unsure, seek advice from a registered tax agent.