A practical way to think about the genuinely mixed cases
The phone in your pocket is used for client calls and for texting your family.
The car does the client visit on Tuesday and the school pickup on Wednesday.
So where, exactly, does “business” end and “personal” begin?
It's rarely a clean line. But there is a workable way to think about it — and getting it right matters for both your tax position and your genuine understanding of how the business is performing.
The short answer
The core test is purpose: was this expense genuinely incurred to earn business income, or was it for private or domestic benefit? Many expenses aren't purely one or the other — for those, the answer isn't “yes or no,” it's “what proportion,” based on a fair and reasonable estimate of actual business use.
The clearer cases
Clearly business. Stock purchased for resale, business insurance, a website built solely for the business, wages paid to staff.
Clearly personal. Groceries, personal holidays, your own private health insurance, clothing you'd wear regardless of work.
These rarely cause confusion. The genuine grey area — and where most owners get tangled — sits in between.
The genuinely mixed cases
Your phone and internet. Used for both business and personal purposes — apportioned based on a reasonable estimate of business-use percentage.
Your vehicle. Business trips versus personal trips — tracked via a logbook or similarly documented method.
A home office. Apportioned based on the floor area used for business and how much of the time it's used that way.
Meals and travel. Genuinely business-related travel and associated costs are different from a meal that happens to be eaten while working — the purpose of the expense is what matters.
A practical test to apply
Before claiming or recording an expense as business, it helps to ask a specific question rather than a general one:
Would I still have incurred this expense if the business didn't exist?
If the honest answer is no — you wouldn't have bought it, wouldn't have gone there, wouldn't be paying for it — it's a strong business expense. If the honest answer is yes, you'd have this cost regardless of the business, it's either personal, or a mixed-use expense that needs a genuine apportionment, not a full claim.
Why this matters beyond your tax return
Blurring the line doesn't just create tax risk — it distorts your own understanding of the business. A P&L padded with personal spending disguised as business expenses will understate your genuine profit margin, and — just as importantly — a business bank account leaking personal spending makes it much harder to see your real cash position.
A quick self-check
For anything I'm unsure about, would I have incurred this cost even without the business?
For mixed-use items, do I have a documented, reasonable basis for the split — not just a guess?
Am I consistent in how I treat similar expenses month to month?
If the ATO asked me to justify a specific claim, could I explain the reasoning, not just produce the receipt?
When should you get professional help?
you have significant mixed-use expenses — vehicle, home office, phone — and want them apportioned properly;
you're not confident where the line sits for a specific recurring expense;
you've been claiming something you're now unsure was appropriate; or
you want your bookkeeping set up to categorise business and personal spending consistently going forward.
Continue learning
→ What Business Expenses Can I Claim as a Tax Deduction?
→ I Paid a Business Expense Personally — How Should It Be Recorded?
→ Should I Open a Separate Business Bank Account?
SKC Accounting | Knowledge Centre | Knowledge Guide 027
Last reviewed: August 2026
General information only. This guide does not take into account your individual circumstances and is not a substitute for professional accounting, taxation, legal or financial advice.