Can sole traders claim start-up costs?
Understand when start-up costs may be deductible for a new sole trader business.
Summary
Certain start-up expenses may be immediately deductible, including eligible professional advice or services about the proposed structure or operation of a business and certain fees, taxes or charges paid to an Australian Government agency to set up the business or its operating structure. Eligibility conditions apply.
What this means
Section 40-880 allows eligible taxpayers to immediately deduct certain start-up expenditure when the conditions are met. This can include professional, legal or accounting advice about the proposed structure or operation of the business, and eligible payments to Australian Government agencies for setting up the business or its operating structure.
Not every pre-business cost is immediately deductible. Some capital expenditure may instead be deductible over 5 years, while costs of acquiring assets are generally dealt with under the rules for those assets. For individuals, the non-commercial loss rules can also affect when some pre-business deductions can be used.
Typical actions
- Keep detailed records of any spending before and during the start-up phase.
- Separate expenses into those relating to setting up versus running the business.
- Note fees paid to government agencies for registrations and setup.
- Check the ATO's business deductions guidance for the correct treatment.
- Speak with a registered tax agent if your start-up costs are significant.
Official ATO sources
Last checked: 24 August 2026
Business deductions
Main ATO hub for business deductions, including start-up expenses.
Other capital asset and expense deductions
Explains how certain capital expenses, including start-up costs, are treated.
Related questions
- What deductions can sole traders claim?
- How do I register as a sole trader in Australia?
- What records do sole traders need to keep?
- How is sole trader income taxed?
Important notice: Tax Clarity is an independent information tool. This page provides general information based on official sources. It does not provide tax, legal, financial, or accounting advice. Tax rules can change, and how they apply depends on your circumstances. For advice about your situation, speak with a registered tax agent or qualified professional.
Need help understanding this in plain English?
Try the Tax Clarity App for a plain-English answer.