Keeping your tax and business expenses in check when you are self-employed

Running your own business means juggling multiple roles, building relationships, managing time, marketing your services and, of course, delivering the work.

One important aspect that should not be overlooked is how you keep your tax, expenses and financial records in check when you are self employed.

Establishing good financial habits from the start helps create a strong foundation for your business. It also gives you a better understanding of what is coming in, what is going out, what needs to be set aside and what financial commitments are coming up.

Keeping your records current throughout the year also means you are less likely to face a rush at tax time trying to find receipts, identify transactions or work out what different expenses were for.

Below, we explore practical steps for managing your business expenses, keeping the right records and preparing for tax obligations throughout the year.

Understand your deductions 

Knowing what you can and can’t claim as a business expense is important, and it starts with understanding which costs genuinely relate to running your business.

The Australian Taxation Office generally requires a business expense to be connected with earning business income. If an expense has both business and private use, only the business portion can generally be claimed. You also need records that support the expense.

The types of expenses you incur will depend on your business and how you operate.

For instance, if you run your business from home, you may be able to claim eligible running expenses associated with using your home for business purposes. Depending on your circumstances, these could include a business portion of electricity, phone and internet costs or the decline in value of equipment. Different rules can apply when part of the home is specifically set aside as a place of business, including possible capital gains tax implications when the property is eventually sold.

If your business requires travel, eligible costs may also be deductible where they are genuinely connected with business activities. Where a trip combines business and private travel, appropriate records are needed to separate the business portion from private expenses.

Keeping good records throughout the year makes this much easier. Receipts, invoices and supporting information should be captured while the transaction is still fresh, rather than leaving yourself or your accountant to work out what happened several months later.

It’s easy to miss legitimate business expenses when records are incomplete or transactions have not been properly identified. First Class Accounts Ovens & Murray can help keep your bookkeeping records accurate and current so the right information is available when your accountant or registered tax agent prepares your tax return.

Understanding your expenses also helps with planning. When transactions are recorded correctly, you can see where money is being spent, compare costs over time and understand how changing expenses are affecting your cashflow.

Regular bookkeeping means tax time becomes part of an existing process rather than a major exercise in reconstructing the previous financial year.

Get a system sorted 

One of the smartest moves you can make as a business owner is to set up a reliable system for tracking your finances. This includes recording expenses, managing invoices, keeping track of income and making sure transactions are reconciled regularly.

A well organised financial system saves time, reduces errors and gives you a much better view of what is happening in the business.

There are now many accounting platforms and business apps available to small businesses. The important part is choosing software that suits the way your business actually operates.

Accounting software can connect with business bank accounts, assist with invoicing and help keep income and expenses organised. Other apps can support receipt capture, expense management, time tracking, job management, inventory, payments or other parts of your workflow.

Adding more apps does not automatically make a business more efficient. The systems need to work together, and the information flowing between them needs to be accurate.

This is where business app advice can make a difference. First Class Accounts Ovens & Murray can help assess the way information currently moves through your business, identify unnecessary manual steps and recommend apps that fit your existing processes and accounting system.

By staying on top of your finances daily or weekly, you can avoid the end of year rush to get everything in order. Current records also reduce the chance of duplicated transactions, missing expenses and unidentified payments.

Another benefit of maintaining an accurate system is the information it gives you throughout the year.

Rather than waiting until tax time to find out how the business performed, current bookkeeping can help you monitor income, expenses, outstanding invoices and upcoming commitments. Reports can also help identify seasonal changes, increasing costs or areas where spending has shifted.

That information can then support decisions about spending, pricing, staffing and when additional cash may need to be kept available.

Stash that cash 

One of the most common problems for self employed people is failing to set aside enough money for upcoming tax obligations.

When you earn business income, tax may not be withheld automatically in the same way it is from an employee’s salary. Depending on your circumstances, you may also have GST, PAYG instalments, PAYG withholding, superannuation and other liabilities to manage.

A practical approach is to set up a separate savings account for tax and other business obligations. Regularly transfer money based on your expected liabilities so those funds remain available when payments fall due.

You may also be required to make PAYG instalments. These are regular prepayments towards the expected tax on business and investment income and can help spread tax payments across the year rather than leaving a larger amount to deal with after lodging your tax return.

This is also where accurate bookkeeping and cashflow planning work together. Your bank balance alone does not tell you how much money is genuinely available to spend. Some of that money may already be needed for GST, tax, suppliers, wages, super or other upcoming commitments.

Having current figures makes it easier to see those commitments before making decisions about spending.

Superannuation also needs to be considered. If you are a sole trader, you do not pay yourself super guarantee in the same way an employer pays an employee, although you can choose to make personal super contributions. Eligible personal contributions may be tax deductible where the relevant requirements are met, so discuss your contribution strategy and tax treatment with your accountant or financial adviser.

If you employ staff, payroll obligations also need to be built into your cashflow planning. From 1 July 2026, payday super changed the timing of super guarantee payments, which means employers need to account for super contributions alongside their regular payroll cycle.

Budgeting for quieter periods is another important part of managing cashflow. Your income may fluctuate throughout the year, so building a financial buffer can help you manage slower months and unexpected expenses without immediately putting pressure on other commitments.

It is also worth keeping business and personal finances separate. For sole traders, a separate business bank account is not generally mandatory for tax purposes, although the ATO recommends separating transactions because it makes business and personal activity easier to identify. Other structures, including companies, partnerships and trusts, have different banking and record keeping requirements.

If you operate as a sole trader, money you take from the business for yourself is generally treated as drawings rather than salary or wages. Keeping those drawings separate and recorded properly gives you a more accurate view of how much cash the business itself is using.

Taking the headache out of your finances 

Managing your finances does not have to become a major task every time a tax or reporting deadline approaches. By setting up a reliable system, understanding your business expenses and planning for upcoming obligations, you can keep your financial records current throughout the year.

Good bookkeeping also gives you useful information about the business itself. When your accounts are current, you can see how much customers owe you, what bills are coming up, whether expenses are increasing and what cash needs to remain available for tax and other commitments.

If your bookkeeping has become difficult to keep on top of, or your current system involves too much manual administration, First Class Accounts Ovens & Murray can help.

We can assist with reliable bookkeeping, review the way your accounting system and business apps work together, and help improve the processes behind your financial records.

That means you have accurate information available when you need it, while your accountant or registered tax agent has better records to work with when tax time arrives.

Talk to First Class Accounts Ovens & Murray about setting up a bookkeeping system that keeps your tax, expenses and financial records organised throughout the year.

Frequently Asked Questions about keeping expenses in check when you are self-employed

What business expenses can I claim when I am self employed?

You can generally claim eligible expenses that relate to earning your business income. If an expense has both business and private use, you generally need to separate the business portion. You also need records to support the expense. The exact treatment will depend on the type of expense and your circumstances, so your accountant or registered tax agent should confirm what can be claimed.

How long do I need to keep business expense records?

Most business records need to be kept for at least five years, although some records may need to be retained for longer. Keeping receipts, invoices and supporting records electronically can make them easier to retrieve and helps ensure your bookkeeping records can support amounts reported in activity statements and tax returns.

Should I have a separate bank account when I am self employed?

If you operate as a sole trader, a separate business bank account is generally not required for tax purposes, although separating business and personal transactions can make bookkeeping much easier. Partnerships, companies and trusts have different requirements and generally need a separate bank account for the business. Keeping transactions separate also makes it easier to understand business cashflow and identify personal drawings.