Can you claim business expenses without income?

Why it's important to track business expenses

Accurate expense tracking is the foundation of a healthy business. Keeping detailed records ensures you understand where your money is going and helps maximise tax deductions. The ATO requires precise records to substantiate claims, so neglecting this could lead to penalties or missed opportunities to reduce your taxable income.

Tracking expenses also gives insights into your business's financial health. By staying on top of spending, it becomes easier to budget, forecast cash flow, and make informed decisions about scaling or cutting back. Additionally, well-maintained records make tax time much smoother and quicker, reducing the stress that often comes with lodging returns.

For a complete guide to managing your business finances, check out the Governments guidelines on record keeping.

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Benefits of claiming business expenses

Claiming legitimate business expenses offers several advantages. First, it reduces your taxable income, which means paying less tax overall. This is particularly important for sole traders and small business owners operating on tight margins. Additionally, proper claims can improve cash flow, freeing up funds to reinvest in the business.

Expenses such as office supplies, travel costs, and professional services can add up quickly, so knowing what's deductible ensures you're not leaving money on the table. Beyond financial benefits, clearly understanding expenses can help identify inefficiencies or areas where savings are possible. For detailed information on deductions, visit the ATO's guide to business deductions.

Can you claim business expenses without income?

Yes, you can claim business expenses even if you haven't yet generated income. The ATO allows deductions for expenses incurred while setting up your business as long as the costs are directly related to the operation of the business, and you intend to make a profit.

This means costs like registering a business name, marketing, and purchasing essential equipment can be claimed. However, the expenses must be legitimate, and your business must not be classified as a hobby. To qualify, you must demonstrate a genuine intention to conduct a business and eventually earn income. For more clarity, refer to the ATO's business or hobby classification guidelines.

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Why is Thriday the best tool for claiming business expenses?

Thriday is a game-changer for sole traders and small business owners. It combines banking, accounting, and tax into one automated platform, simplifying the process of tracking and claiming business expenses. Here are some reasons why Thriday stands out:

• Automated expense tracking: Thriday connects directly to account to categorise and track expenses in real-time. This eliminates the manual effort of recording transactions and ensures nothing is missed.
• Tax-ready insights: Thriday calculates potential deductions and provides detailed reporting, making it easier to file your tax return directly from the Thriday platform.
• Integration of banking and accounting: With Thriday, your finances are managed in one place, reducing the need for multiple tools and saving you time.
• ATO compliance: Thriday's automated features ensure that records are accurate and compliant with ATO requirements. This is particularly important when claiming deductions without income.
• Expert support: Thriday has a team of expert accountants that can support your BAS, GST and tax related queries with ease.

Choosing Thriday gives you the peace of mind that your expenses are tracked accurately and that you're maximising every deduction available. Learn more about Thriday and how it simplifies business finances.

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What business expenses can you claim?

The ATO allows deductions for any expense directly related to earning income. Some common categories include:

• Office expenses: Rent, utilities, internet, and office supplies.
• Equipment: Computers, printers, and tools necessary for your trade.
• Travel expenses: Business-related car expenses, public transport, and flights.
• Professional services: Accounting, legal advice, and consultancy fees.
• Marketing: Advertising, website hosting, and social media promotions.
• Training: Courses and certifications directly related to your industry.

It's essential to separate personal and business expenses to avoid issues with the ATO. Thriday's expense categorisation feature helps keep this distinction clear.

What is immediate tax deductibility for small business start-up costs?

The ATO provides immediate deductions for small business owners for certain start-up costs. These include expenses related to establishing a business structure, such as:

• Legal advice on setting up your business
• Costs of creating a business plan
• Accounting advice to structure your finances effectively

Immediate tax deductibility means you don't have to depreciate these expenses over several years. Claiming these costs upfront can provide a valuable cash flow boost when starting your business. For more details, see the ATO's guidance on start-up expenses.

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Will the ATO allow you to claim business expenses without receipts?

The ATO requires evidence to support all claims, and receipts are the most reliable form of proof. Without them, you may struggle to substantiate your deductions. However, the ATO does allow some flexibility in some instances:

• Diary entries: You can keep a diary note instead of a receipt for small expenses under $10 (up to $200 total).
• Bank statements can sometimes substitute for receipts if they clearly show the transaction details.

Thriday's integrated receipt capture feature ensures that you never lose track of important documentation. Simply upload a photo of the receipt, and Thriday will store it securely for easy retrieval.

Can a sole trader claim deductions against other income?

As a sole trader, you can offset business losses against other income, such as wages or investment income. This is known as "non-commercial loss" rules. However, the ATO has strict criteria to determine whether your business qualifies:

• The business must have made a profit in at least three of the last five years.
• The business's assessable income must exceed $20,000.
• The business's assets or other tests must meet specific thresholds.

If you don't meet these criteria, the losses may need to be deferred to future years when the business becomes profitable. You can read more about the ATO's non-commercial loss rules.

Final thoughts

Even before earning income, understanding how to track and claim expenses is essential for small business success. Thriday simplifies this process, ensuring you remain compliant with the ATO and maximise every deduction available. By automating expense tracking and integrating banking, accounting, and tax, Thriday allows you to focus on growing your business instead of getting bogged down by paperwork.

Sign up with Thriday for free today and experience the easiest way to track, claim, and manage your business expenses.