10 Things You Can’t Claim on Tax

One of the most common errors businesses and professionals make when lodging tax returns is claiming deductions for things that are not deductible. It’s understandable; the myriad tax rules around deductions are highly specific and can be confusing.

That said, the ATO expects you to take reasonable care to comply with tax obligations, so you need to ensure you get your deductions right to avoid potential penalties or audits. Luckily, that’s where we come in.

The most important thing to keep in mind is that not every expense that you incur in the course of doing business qualifies for a deduction. Here are examples of 10 things you can’t claim on tax. This is not an exhaustive list, so we recommend consulting our tax return accountants to make sure your deductions make the cut.

1. Fines and Penalties

Any fines or penalties charged under Australian or foreign law are considered personal liability and are not tax-deductible. These include late fees, speeding tickets, and court-ordered fines in civil or criminal matters.

Even if you incur the penalty while doing business (e.g. a speeding ticket while making business deliveries), you cannot claim it on tax.

2. Entertainment Expenses 

Money spent on attending functions, celebrations, or events falls under entertainment expenses and is non-tax deductible. These include dinners, cocktail parties, sporting events and any other functions involving food, drinks, and recreation.

This is not to be confused with the expenses of hosting parties or other functions, such as Christmas parties, where some expenses, like food, may be deductible (although alcohol is never tax-deductible), and any fringe benefits tax you’ve paid on the event costs may be deductible.

Tip: Non-recreation events connected with your work, such as conferences, seminars, and training workshops, may qualify for tax deduction. You can claim fares, registration costs, accommodation, and meals.

3. Meals and Drinks With Clients 

When you take a client out for a meal to close a deal or just to appreciate them, the meals and drinks you buy count as entertainment expenses, as they are more social in nature. So, while that lunch or dinner is part of doing business, you cannot claim a deduction on it.  Meals and non-alcoholic beverages are tax-deductible only when:

a) Consumed during business travel (such as when you’re away from home overnight for work).

b) Coffee or light snacks during a business meeting, provided it takes place at your office or another business setting, rather than a restaurant or café.

c) Catering for a business meeting or seminar (in a work environment).

4. Clothing 

You cannot claim the costs of conventional clothing that you wear to work, even if your employer mandates it. For example, if your office dress code calls for wearing a suit to work, buying a suit does not qualify for a deduction.

There are only three types of work clothing you can claim on your tax return:

• Occupation-specific clothing that cannot be worn in any other profession. For example, a nurse’s scrubs or a chef’s uniform.
• Branded clothing that is mandatory. For example, a t-shirt with your company’s logo that you’re required to wear at work.
• Protective clothing that’s directly related to your work, such as steel-toed work boots, protective goggles, and abrasion-resistant trousers.

5. Commuting Expenses

Commuting between home and work is regarded as private travel, and thus is not tax-deductible. According to the ATO, only travel costs that you incur in the course of performing work duties can be claimed.

For example, you can claim a deduction on travel expenses when making deliveries. Travelling from home to work, however, puts you in a position to earn your income and is not part of your work.

There are a few exceptions (such as when transporting bulky equipment or working from home occasionally), but generally, commuting expenses are non-tax-deductible. 

6. Partner or Family Travel

You can claim business-related travel expenses for yourself and your employees. These deductions do not extend to your partner or family members, even if they accompany you on your business travels.

The only time when you can claim travel costs for a family member is if they are connected to the business (e.g. they are a director or one of the employees) and their travel is related to the business.

7. Gym/Wellbeing Costs

In most cases, a gym membership is considered a private expense, even for professions where staying fit is a requirement, such as the military or firefighters. The same applies to other wellness costs, such as yoga classes.

You can only claim fitness-related expenses if rigorous physical activity is an important and regular aspect of your work. A fitness instructor or a trapeze artist may be eligible to claim deductions on their gym membership, as their jobs involve regular and demanding physical activity that puts them at risk of injury or poor performance without it.

8. Entertainment Gifts 

Gifts to others (can be clients, prospective customers, an organisation like a charity) are usually tax-deductible as long as they are non-entertainment.

You can claim gift hampers, branded items like t-shirts and pens, and money donations to deductible gift recipient (DGR) organisations.

However, if it is an entertainment gift, such as concert tickets, meals, or a holiday, you cannot claim a deduction on it.

9. Childcare 

Childcare costs are non-tax deductible, and there’s no scenario where you can claim them. Even if you pay for childcare so that you can attend a business meeting, it’s still considered a private expense.

The same applies to private school fees and tuition at universities or TAFE institutions; you cannot claim the costs of educating your children.

10. Cash Expenses Without a Receipt

Keeping accurate records is crucial if you plan to submit claims for any expenses. If there’s no receipt or invoice for a particular cash expense, then you cannot claim it since you have no evidence that you spent money. A bank statement on its own is not enough to make a claim. However, for FY26-27, the government has introduced an  $1000 instant tax-deduction scheme, so you can claim up to this amount without receipts.

Get Tailored Tax Advice from PCR Accounting & Advisory 

Our expert team of tax advisors at PCR can help you figure out which deductions you can and cannot claim on your tax returns. We have decades of expertise in tax planning and can help you understand your options and make tax decisions that align with your bigger financial picture.

Contact us today to get personalised tax advice from our tax consultants.

Disclaimer: This blog post is for informational purposes only and should not be considered as financial or legal advice. Consult with a qualified professional for personalised guidance based on your specific circumstances.