Most Missed Deductions by Small Businesses in 2025

Running a small business in Australia isn’t just about keeping clients happy and cash flowing — it’s also about not handing the ATO more than your fair share. Yet every year, business owners leave thousands of dollars unclaimed because they don’t realise what they can deduct. The ATO calls it the “tax gap”: the difference between what should be collected and what actually comes in.

For small businesses, that gap is enormous. In 2021–22, the ATO estimated it at $17.7 billion, roughly 12.6% of the sector’s theoretical tax liability. A big slice of that comes from deductions — either forgotten, or claimed incorrectly.

Let’s unpack the most commonly missed deductions in 2025, what they mean for business owners, and how to avoid falling into the same trap.

The Everyday Expenses That Slip Through

Some costs are so routine they don’t feel like deductions at all. Business phone bills, data usage, internet plans, stationery, printing and even postage are deductible if they’re genuinely work-related.

Why they get missed: owners either don’t track them, or pay for them out of a personal account without separating the business use.

Example: A sole trader paying $90 a month for their mobile plan, using it 70% for business, could be missing out on more than $750 in deductions each year if they don’t apportion properly.

Vehicle Expenses Beyond Fuel

Many business owners stop at fuel receipts. But the ATO allows deductions for:

• Depreciation (decline in value of the car)

• Servicing and repairs

• Insurance and registration

• Lease payments (if applicable)

Two claim methods apply: cents per kilometre (simpler but capped) or logbook method (often higher if you use your car heavily for business).

Why it gets missed: Without a logbook, people underestimate their true running costs.

Example: A tradesperson clocking 15,000 km a year could be under-claiming by thousands if they only hold fuel receipts instead of using the logbook method.

Home Office and Hybrid Work Costs

The shift toward flexible work hasn’t just changed commutes — it’s changed deductions too.

Deductible portions can include:

• Rent or mortgage interest

• Electricity, gas, and cleaning

• Internet and phone usage

• Office furniture and equipment depreciation

The ATO offers a fixed-rate shortcut, but careful record-keeping often leads to a larger claim.

Why it gets missed: Business owners either assume their home doesn’t qualify, or they don’t want the hassle of apportioning personal vs business use.

Prepaid Expenses

Payments made in advance — like annual insurance, software licences, or rent — are deductible in full if the service period is 12 months or less.

Why it gets missed: Many owners mistakenly spread these costs over several years, reducing their immediate tax benefit.

Training, Subscriptions, and Professional Fees

From a $400 online course to $2,000 in accounting fees, professional development and advice are deductible. Subscriptions to industry bodies or software platforms (think Xero, Adobe, Trade-specific apps) also count.

Why it gets missed: Owners forget to claim “non-physical” expenses, especially digital subscriptions.

Bad Debts Written Off

If you’ve chased an invoice and it’s clearly unrecoverable, you can write it off as a deduction — provided you do so before 30 June.

Why it gets missed: Businesses delay writing off debts, or don’t formally record the write-off.

Superannuation Contributions

Employer super payments are deductible — but only once actually paid. The cut-off is June 30, not when you record them in your books.

Why it gets missed: Cash flow squeezes cause businesses to delay payments, costing them a deduction this year.

Start-Up and Restructuring Costs

Since recent rule changes, certain costs of starting or restructuring a business (like legal or accounting advice) are immediately deductible rather than written off over five years.

Why it gets missed: Many owners still apply old rules and spread the cost unnecessarily.

The Bigger Picture: The Cost of Missed Deductions

ATO data shows small businesses had a theoretical liability of $139.9 billion in 2021–22. With a 12.6% net tax gap, that’s $17.7 billion uncollected — some of it from over-claimed deductions, but much of it from under-claimed or missed ones too.

Put another way: if even 10% of the 2.4 million small businesses in Australia underclaim by just $2,500 each, that’s a collective $600 million left on the table.

Why This Matters for Businesses in Miranda and Southern Sydney

Many local businesses here run on thin margins — cafes, tradies, small retailers. For them, missing even $2,000 in deductions could mean the difference between covering BAS comfortably or dipping into an overdraft.

Industry benchmarks from the ATO show that businesses reporting expenses far below the average are often under-claiming, while those far above may be flagged for audit. Either way, knowing your entitlement is critical.