Startup Tax Deductions You Can Claim in Year One | Bottrell Accounting
Startup Tax Deductions – What You Can Claim in Year 1
Understand, maximise and claim the right deductions to reduce your startup tax bill
Starting a business in Australia comes with its fair share of upfront costs and early stage expenses. The good news? Many of these costs may be tax-deductible.
If you’re launching a business in Newcastle, Maitland or Gosford, it’s critical to understand which expenses you can claim in your first year and how to stay compliant with the ATO from day one.
This Bottrell guide breaks down startup tax deductions, common mistakes, and how to keep proper records that support your claims at tax time.
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Understanding Startup Deductions and Eligibility
What Are Startup Tax Deductions?
Startup tax deductions are business expenses you incur in the early phase of setting up or running your business.
If they are directly related to earning assessable income, they may be deductible.
Some deductions apply before your first sale, while others become claimable once your business is trading.
To be deductible:
– The cost must relate directly to your business activity
– The expense must not be private or domestic in nature
– You must have records to prove it
Key Startup Costs You May Be Able to Claim
Many new business owners don’t realise that the costs they pay before launching may be claimable.
Here are some of the most common eligible startup deductions:
Business Setup Costs
– ABN and GST registration fees
– ASIC company registration fees
– Legal fees for setting up your structure
– Accounting and tax advice related to setup
– Government license and permit costs
– Website domain purchase and initial design work
These expenses can usually be claimed once your business starts trading.
Professional Services
– Business planning advice
– Tax planning consultations
– Initial legal consultations
– Financial modelling and forecasting
If the purpose of these services is to help get your business off the ground, they’re typically deductible.
Software and Tech Setup
– Xero, MYOB or QuickBooks subscriptions
– Microsoft Office or Google Workspace tools
– Email hosting and domain registration
– Industry specific software licenses
Subscriptions and software setup fees can be apportioned if used for both business and private purposes.
Marketing and Launch Costs
– Logo design and branding
– Launch advertising (digital, radio, print)
– Social media setup and management
– Google Ads and SEO setup
These can be claimed as marketing expenses as soon as your business begins operating.
Equipment and Asset Purchases
– Tools, machinery or office equipment
– Computers, printers, or phones used in the business
– Furniture for your home office or commercial space
These may be claimed outright or depreciated under temporary full expensing or instant asset write off rules (subject to eligibility and thresholds).
Commonly Missed Deductions in Year 1
Many startups miss deductions simply because they don’t know what to track or assume early costs aren’t relevant.
Here are common deductions new business owners forget to claim:
– Prelaunch consulting fees
– Home office expenses (if you start from home)
– Internet and phone used for business purposes
– Bank fees on your business account
-Business insurance (public liability, professional indemnity)
– Training courses directly related to your startup
If it’s directly related to the income you’ll generate, it should be considered.
What You Can’t Claim
Some startup costs aren’t deductible, even if they seem business related. Examples include:
– Personal clothing or meals
– Fines or penalties
– Entertainment expenses (unless GST free client meals during travel)
– Private portion of expenses (e.g. home internet used 80% for personal use)
Always separate personal and business usage. If in doubt ask your accountant before lodging.
Can You Claim Startup Losses in Year 1?
If your business makes a loss in its first year, that loss may be carried forward and offset against future income.
However, the ATO has rules for how noncommercial losses are treated. For sole traders and partnerships, you must pass one of several income or asset tests.
If you’re trading as a company or trust, you may be able to carry forward startup losses more easilybut professional advice is essential.
Why You Should Get Advice Before You Lodge
Startup tax can be complex. The first year setup is where most business owners either overclaim or underclaim deductions sometimes both.
By working with a registered tax agent, you’ll:
– Identify all eligible deductions
– Stay within ATO guidelines
– Avoid errors that trigger audits
– Set up smart systems from the start
– Reduce your taxable income legally and correctly
An accountant will also advise whether you’re better off using cash or accrual accounting, and how to structure your chart of accounts to match your business goals.
Recordkeeping and Tracking Your Expenses
ATO Recordkeeping Requirements
To claim deductions, you must have records to back up every claim.
The ATO requires:
– Invoices or receipts showing supplier name, date, amount and GST
– Bank statements showing payments
– Logbooks for vehicle claims
– Expense summaries (spreadsheet or software)
– Evidence that your business has started trading
Records must be kept for at least five years.
We recommend using cloud based software like Xero or MYOB to keep clean records from day one.
How to Track Startup Expenses Properly
To make tax time stress free and maximise your first year deductions:
– Open a separate business bank account
Keep all business income and expenses in one place
– Use software like Xero or MYOB
Automate your invoicing, bank reconciliation and expense tracking
– Create digital folders for receipts and contracts
Scan and save them in your accounting system or Google Drive
– Use a vehicle logbook if driving for business
The ATO requires at least 12 weeks of logbook entries
– Talk to your accountant quarterly
Avoid surprises and missed deductions
Industry Expertise
Bottrell Startup Support
– Newcastle, Maitland and Gosford
At Bottrell Accounting, we specialise in startup tax advisory across NSW.
Our team of accountants and tax agents can:
- Review your startup costs and eligibility
- Set up your accounting software
- Lodge your first tax return with full compliance
- Advise on structure, GST, PAYG and recordkeeping
- Help you avoid common startup traps
We work with sole traders, companies, trusts and partnerships at every stage from concept to trading.
Book a Startup Consult Today
If you’re unsure what you can claim in your first year of business, don’t guess.
Speak to our team of experienced startup accountants today.
- Offices in Newcastle, Maitland and Gosford
- Online and in person appointments
- Fixed fee startup tax packages available
Bottrell Accountants, Tax Agents & Financial Planners – Maitland:
- Office: 93 Lawes St, East Maitland, NSW, 2323
- Phone: 0249336888
- Email: maitland@bottrellaccounting.com.a
- Hours: Monday–Friday 7:30am–5:30pm | Saturday 9am–2pm
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