Can I claim AI tools and subscriptions as a tax deduction in Australia?

Short answer: if you use it to make money in your business, an AI tool is generally deductible like any other software subscription. Here’s the slightly longer, Australian-specific version, in plain English. (This is general information, not tax advice, your accountant or ato.gov.au is the authority for your situation.)

The general rule

In Australia, you can generally claim a deduction for an expense that is incurred in earning your assessable income. AI subscriptions and usage fit that rule the same way other software does:

• A monthly AI subscription (ChatGPT Plus, Claude Pro, Microsoft 365 Copilot, Google AI Pro) used for your business is generally deductible as a subscription/software expense.
• Usage-based AI (per-token API billing, Claude Code, an automation platform’s run costs) is generally deductible as a business running cost.
• One-off setup or build costs for an automation may be deductible in the year incurred, or treated differently if they create a longer-term asset, this is one to check with your accountant.

The two things that trip people up

1. Business vs private use

If a tool is partly personal (you also use ChatGPT to plan holidays), you can only claim the work-related portion. Decide on a reasonable business-use percentage, apply it, and be able to explain how you arrived at it.

2. Records

Keep the tax invoice for each subscription, and for usage-based tools keep the statements. Because a lot of AI is billed in USD to a card, the amount you claim is the actual AUD amount charged to you (the converted figure on your statement, including any card currency conversion).

GST, briefly

Many overseas digital subscriptions now charge Australian GST and show it on the invoice. If you’re registered for GST and using the tool for business, you may be able to claim that GST credit, so it’s worth checking each provider’s invoice rather than assuming.

The practical takeaway

For most Australian small businesses, the AI tools you use to run the business, the subscriptions, the automation platforms, the per-use AI, are a normal, deductible business expense. The job is simply to keep the invoices, apportion any private use, and confirm the specifics with your accountant.

And if you’re trying to work out which AI tools are actually worth paying for in the first place (deductible or not, an unused subscription is still wasted money), that’s exactly what On Autopilot’s free 30-minute audit sorts out: what’s worth running in your business, and what to cancel.