How Hnry plans to help sole traders claim $3.5 billion missed in tax deductions

Aussie sole traders are spending eight hours a week on financial admin while juggling work-life balance and cost of living pressures, with new research revealing that despite trying to manage their deductible business expenses Australia’s 1.5 million self-employed workers are missing out on $3.5 billion a year in unclaimed expenses.

All-in-one digital accounting service for sole traders Hnry, which was founded in New Zealand in 2017 and opened its first Sydney office in 2020, engaged independent Australian market research agency Resolve Strategic to conduct an online survey of 504 Australian sole traders in June 2023.

The research found that 42% of sole traders do not claim all the tax deductions they’re entitled to and on average, each misses out on more than $5,500 in tax deductions every year – equating to as much as $3.5 billion in unclaimed expenses each year.

The research coincides with the Australian rollout of Hnry’s business debit card, which it says is a world-first product that will transform the way sole traders manage their business expenses. 

Acting like a business account, the Hnry Visa business debit card automatically lodges every business expense and immediately offsets tax, and can be used through the Hnry app and anywhere that accepts Visa, both in-store and online.

Hnry says the digital card was developed in response to customer feedback and underwent an initial test phase with more than 100 Australian users.

Hnry’s managing director in Australia, Karan Anand, said the card will drive financial empowerment, allowing people who work for themselves to never miss a tax deduction again and focus on what really matters – running their businesses. 

“The reason we’re calling this a world-first is because we’re the first accountancy that’s offering this. So debit cards aren’t new to the world, but an accountancy offering a debit card is,” he tells SmartCompany.  

“Claiming expenses can make a huge difference to a business, especially when we’re dealing with inflation and a cost of living crisis.”

Solutions designed for sole traders

According to the Australian Small Business and Family Enterprise Ombudsman, more than 60% of Australian small businesses and self-employed or non-employing businesses, but Anand says Hnry’s research found sole traders are too often lumped into the same category as bigger businesses. 

“When you’re talking about small and medium enterprises, in some definitions you’re actually talking about companies that are turning over up to half a billion dollars a year, and when you’re comparing that with a disability support worker who’s working in regional Queensland, they have no connection with a company that’s turning over $500 million a year,” he says. 

“So that actually needs to be a conversation which is about sole traders, which is distinct and separate to SMEs. 

“Some of the things we’ve learnt is that more than 70% of sole traders are sole traders by choice and they enjoy it, but it can be taxing from the perspective of the financial admin burden it carries. 

“As a sole trader, your needs and requirements and your day-to-day routines are very different. But as far as the economy is concerned, you’re treated the same because you’re strictly speaking an SME.

“What Hnry is trying to do is distinctly create a new category and then create a conversation which talks about that.”

One of the first sole traders to receive Hnry’s new Visa business debit card is South African-born counsellor and psychologist Jean-Pierre Viviers, who, after moving to Tasmania, initially found it tricky to navigate the Australian tax system and what could and could not be claimed as a business expense. 

Tasmania-based counsellor and psychologist Jean-Pierre Viviers. Source: Supplied

Viviers anticipates he lost around $5,000 in unclaimed expenses last year.

“I think the amount of unclaimed business expenses is concerning because it probably makes people not want to go into business with themselves as a sole trader,” he said. 

Viviers urged sole traders who may be procrastinating on doing financial administration to not put it off any longer. 

“There’s a saying that I have in my kitchen which is clean as you go. So when you’re making food, you’re cleaning up immediately,” he says. 

“I recommend doing the same for business expenses as soon as it comes through.”