What You Can (And Definitely Can't) Put Through the Business

Business tax deductions: Australia FBT

A lot of business owners think of their company account as an extension of their personal wallet. It's understandable. You built the thing. It's your money. So why can't you spend it how you want?

The ATO's answer is straightforward. Your company is a separate legal entity. When it pays for something that benefits you personally, that's a fringe benefit. And fringe benefits are taxed at 47%. That rate catches a lot of people off guard, usually at the worst possible time.

Here's a plain-English rundown of what crosses the line, and what doesn't.

Our Client's Experience: 

"The Aevum team were very professional and also offered solutions to retaining more out of your tax, especially in areas that had been unexplored."

— Nick Rosson

The Three Golden Rules

Every deduction needs to clear three tests before you can claim it:

1. You paid for it yourself and were not reimbursed.

2. It directly relates to earning your income.

3. You have a record to prove it.

   
   

Gym Memberships

This one is almost always a no. Tradies especially like to argue that fitness is essential to the job. The ATO disagrees. Physical fitness is considered a personal requirement, not a business one. If the company pays for it, it's a fringe benefit and you'll pay 47% on it.

The only real exception is professional athletes, where being fit is literally the entire job. A plumber, a painter, a police officer? None of them qualify.

2. Taking a Client Golfing

A round of golf at Joondalup with a client feels like marketing. To the ATO, the moment you pick up a club it becomes recreation, and recreation is entertainment.

Golf days, restaurant dinners, theatre tickets and footy trips are generally not deductible in the way people expect. If you put a golf day on the company card using the 50/50 FBT method, you end up paying tax to play golf. It's a pricey round.

Airport lounge memberships are different. If you travel regularly for work, a lounge membership is considered otherwise deductible. The company gets the tax deduction and pays zero FBT. That one's a genuine win.

3. Taking Your Spouse on a Business Trip

Flying your partner to a Melbourne conference on the company card is one of the more expensive mistakes we see. If your spouse doesn't work for the company and isn't required to be there, their flights and accommodation are a private benefit. The company pays FBT on the full cost.

"They helped at the booth for an hour" doesn't cut it. The ATO looks at the dominant purpose of the trip. If they were mainly there to see the sights and have a nice dinner, it's private. Keep family travel separate from business travel.

4. School Fees

This is probably the most expensive piece of pub advice in Australian business. Do not pay your children's school fees through the company. The numbers are brutal.

Here's what it actually costs on a $20,000 annual school fee:

• School fees have no GST, so the Type 2 gross-up rate of 1.88 applies

• Taxable value: $20,000 x 1.88 = $37,600

• FBT at 47%: $17,672

• Total cost to the business: $37,672 to cover a $20,000 bill

You'd be much better off paying yourself a salary, paying your marginal tax rate, and paying the school directly. The maths rarely works in your favour when routing school fees through a company.

5. The Work Ute

Good news for tradies: a ute or commercial van used mainly for work can be FBT-exempt. But the exemption is easy to break.

What's fine: home-to-work travel, trips between job sites, and minor personal use like stopping for milk on the way home or dropping the kids at school on the way to a job.

What breaks it: taking the ute on a private trip away. Even one weekend to Margaret River with a jet ski on the back can taint the vehicle for the whole year.

The payload problem: to qualify as a commercial vehicle, the ute needs a payload capacity of one tonne or more. Many owners add bull bars, canopies, and tow bars without realising those accessories reduce the payload. If it drops below 1,000 kg, the vehicle gets reclassified as a car and FBT applies. Ben De Rosa checks the actual payload for every client with a ute.

6. The Christmas Party

You can throw a Christmas party for your team, but keep a close eye on the per-head cost. The $300 minor benefit threshold is what protects you.

Stay under $300 per person and the party is FBT-exempt. But if the bill hits $305 per person, the entire amount becomes subject to FBT. Not just the extra $5. The whole lot.

There's a catch with the exemption though: if you stay under $300 and claim it as FBT-free, you can't claim the GST or the income tax deduction. If you spend more than $300, you pay 47% FBT but get the full deduction. Staying under $300 is almost always the cheaper outcome, so stop ordering drinks when you're getting close.

7. Home Office Deductions

Plenty of business owners claim a slice of their mortgage because they answer emails from the kitchen table. The ATO requires more than that.

To claim occupancy costs like mortgage interest, rates, or land tax, your home needs to be a genuine place of business. That means a dedicated area used exclusively for business activity, where clients actually come to visit you.

That works for: a doctor running a clinic from a converted garage, or an architect with a home studio where clients come for consultations.

That doesn't work for: a tradie doing invoices at the kitchen table at night.

There's also a longer-term risk worth knowing about. If you do legitimately claim occupancy costs, you give up part of your main residence CGT exemption. Saving $2,000 in tax now could mean a $50,000 capital gains bill when you sell the property in ten years. Always run the long-term numbers with Ben before going down that path.

The Pub Test

When you're not sure whether an expense crosses the line, run it through a simple test. If you explained it to a stranger at the pub, would they say "yeah, that's a business cost" or would they wink and say "nice one"?

If they'd wink, leave it out. The ATO's data-matching has become very good. They can cross-reference vehicle registrations, property titles, and lifestyle assets. If your reported income doesn't line up with how you appear to be living, you'll hear about it.

There are plenty of legitimate deductions available to business owners. The goal is knowing where the line sits.

At Aevum Accounting, we help business owners understand exactly what belongs in the business and what doesn't. Talk to Ben before your next big purchase.

Click here to book a consultation with our team.

Disclaimer: The information and strategies shared in this article are for general informational purposes only and do not constitute specific tax or financial advice. Everyone's situation is unique, and tax laws are complex and constantly evolving. For personalised advice tailored to your specific individual or business needs, we always recommend consulting with a qualified professional at Aevum Accounting.