By Mark Churchmichael, Head of Tax and Compliance
Most missed deductions aren’t missed because they’re aggressive or complex. They’re missed because they sit in technical corners of the law, rely on habits rather than memory, and require structure rather than last‑minute reconstruction.
Small amounts. Repeated annually. Compounding quietly.
Below are 7 commonly overlooked deductions for the 2026 tax year in Australia, with practical examples, legal grounding, technical conditions for claiming, tax return treatment, and proper record‑keeping standards.
This is not aggressive planning. These are ordinary deductions under long‑standing ATO rules.
1. Home Office Running Expenses
(Individual & Company)
Legislative basis: ITAA 1997 s8‑1 ATO TR 2022/2 (Working from Home)
What’s deductible: Running expenses where income‑producing activities occur at home;
- electricity
- internet
- phone
- depreciation of office equipment
(Not occupancy costs unless a place of business test is satisfied.)
Why it’s missed:
- No dedicated room
- Irregular WFH patterns
- No time tracking
Practical example:
Jane earns $200,000 per year. She works from home 3 days per week, 8 hours per day, for 48 weeks.
Hours: 8 × 3 × 48 = 1,152 hours
ATO fixed rate method (70c/hour): 1,152 × $0.70 = $806 deduction
Tax impact (top marginal rate): ≈ $383 cash lost per year
This excludes:
- phone apportionment
- internet apportionment
- depreciation of desk, chair and laptop
Record‑keeping requirements:
- diary or digital log of hours worked
- evidence of income‑producing activity (emails, calendars, rosters)
2. Work‑Related Self‑Education
(Individual)
Legislative basis: ITAA 1997 s8‑1 TR 98/9 (self‑education expenses)
What’s deductible: Education expenses where the course
- maintains current skills, or
- improves skills used in the current income‑earning role
Deductible categories:
- course fees
- textbooks
- stationery
- travel to course location
- depreciation of equipment used for study
Not deductible
- education to enter a new profession
- career‑change qualifications
- general personal development courses
Why it’s missed
- fear of ATO scrutiny
- confusion between new career vs skill maintenance
Practical example:
Robert earns $95,000 as an IT analyst. He completes a cyber‑security certification directly related to his role.
Costs:
- course fees: $3,200
- textbooks/software: $600 Total: $3,800
Tax impact: ≈ $1,200 cash lost
Record‑keeping
- tax invoices
- course outline
- evidence of relevance to current duties
3. Depreciation of Work‑Related Assets
(Individual & Company)
Legislative basis: ITAA 1997 Div 40
What’s deductible: Decline in value of income‑producing assets;
- laptops
- phones
- monitors
- tools
- specialist equipment
- office furniture
Business/private use apportionment required.
Why it’s missed:
- receipts lost
- belief there Is no necessary connection
Practical example (Company):
IT equipment purchased: $60,000 No depreciation claimed.
Missed deduction (first year): ~$20,000 Tax impact at 25% company tax rate: $5,000 cash paid unnecessarily
Record‑keeping
- asset register
- purchase invoices
- business/private usage logs
4. Motor Vehicle Work Use
(Individual & Company)
Legislative basis: ITAA 1997 Div 28 TR 2021/2
Methods available:
Cents per kilometre method
- maximum 5,000km per year
- no receipts required
- reasonable estimate required
- no separate fuel/rego/insurance claims
Logbook method:
- 12‑week continuous logbook
- valid for 5 years
- business percentage applied to actual costs
- allows claims for: fuel servicing insurance registration depreciation interest
Why it’s missed:
- no logbook
- no contemporaneous trip records
- misunderstanding of home‑to‑work vs work travel
Practical example:
Jane undertakes regular client travel: 3,500km/year.
Cents/km method deduction: ~$3,080 at 88 cents per km rate Tax impact: ~$1,460 cash lost
Record‑keeping:
- 12‑week logbook
- retain for 5 years
- odometer records
- fuel and servicing invoices
- business purpose notes
5. Cost of Managing Tax Affairs
(Individual)
Legislative basis: ITAA 1997 s25‑5
What’s deductible: Costs incurred in managing tax obligations;
- tax agent fees
- accounting fees
- tax advice
- ATO objection costs
Why it’s missed:
- bundled invoices not itemised
- assumed to be non‑deductible personal costs
- not separated from other advisory fees
Practical example:
Robert pays:
- tax agent fees: $1,100
- tax advice: $700
- Total: $1,800
Tax impact: ≈ $840 cash lost
Record‑keeping
- engagement letters
- tax invoices
- service descriptions
6. Pre‑Paid Professional & Insurance Expenses
(Individual & Company)
Legislative basis: ITAA 1997 s8‑1 Div 82KZ (prepayment rules)
What’s deductible: Prepaid expenses up to 12 months;
- professional subscriptions
- insurance
- memberships
- software licences
Why it’s missed:
- timing errors
- no tracking of coverage periods
Practical example (Company):
Prepaid costs: $5,500 Not claimed correctly.
Tax impact at 25%: $1,375 lost
Record‑keeping
- invoices
- coverage periods
- allocation worksheets
7. Internet & Phone Apportionment
(Individual & Company)
Legislative basis: ITAA 1997 s8‑1 ATO substantiation rules
What’s deductible: Business‑use portion of;
- mobile plans
- home internet
- data usage
Why it’s missed:
- no usage analysis
- no call/data logs
- treated as fully private
Practical example:
Jane’s phone bill: $2,400/year
Business use: 40%
Deduction: $960
Tax impact: ~$450 lost
Record‑keeping:
- 4‑week representative usage log
- phone bills
- internet invoices
Why these deductions are consistently missed
Because they depend on:
- logs
- structure
- documentation
- classification
Not memory or intuition.
Practical tracking systems (during the year)
- monthly receipt capture
- asset register maintenance
- work‑travel logging
- expense software packages
- quarterly expense reviews
Tax accuracy is operational, not seasonal.
Missed deductions in prior years
This is where recovery often occurs:
Income tax
- most entities: 4‑year amendment period
- individuals/small businesses: typically 2 years
GST
- BAS amendments generally within 4 years
Depreciation
- missed depreciation often correctable through amendments or later‑year adjustments
Final position
Most tax leakage isn’t dramatic. It’s technical. Incremental. Systemic. Repeated annually.
The difference between a compliant return and an efficient one is rarely strategy. It’s records, systems, reviews, and structure.
That’s where real tax outcomes are built.
Did you find these insights valuable? Follow Stewart & Smith Advisory for more expert guidance on navigating the complexities of business finance.