TAX Considerations for TRADIES

It’s tax time!

That means it’s time to gather your receipts, send in your shoe boxes, and do all you can to increase your tax refund.

Given the nature of their work, tradies are among the luckiest members of the Australian workforce, being able to claim significant tax deductions and achieve excellent tax return refunds, IF you keep the appropriate substantiation and records. Below are some handy tips and things to consider, but do feel free enquire to speak with one of our experienced specialists who can help you achieve maximal deductions.

CAR EXPENSES These present the biggest opportunity for a deduction for most tradies, but there are some important considerations to ensure your claim stands up in the event of an ATO audit. What can you claim:

• Cost of using your car when travelling between jobs/job sites.

What can’t you claim:

• Generally, you CANNOT claim car use for travel between home and your first jobsite of the day, and similar for travel between your last jobsite and home at the end of the day.

There are however a few exceptions when you CAN claim this type of travel:

• If you have no fixed place of work (i.e. no fixed site or factory that you stop at first up each day).
  

• You carry bulky tools in your car, but only if ALL of the following also apply to you:
  

  • The tools are ESSENTIAL to perform your work (not just carrying in your preferred brand of tool because you don’t like what your employer provides you on site)
    

  • The tools are too heavy to bring to work any other way (i.e. you couldn’t lug them on public transport).
    

  • When there is no secure storage on site for you to leave them behind, meaning you have to take your tools to work and back home at the end of each day.[JH2]

Making the most of your Car claim:

In order to get the maximum claim for your car use, you will need to prepare a 12 -week logbook of all your travel (business and personal) and then keep receipts and records of all your associated expenses. The logbook will determine what percentage of these costs you can claim, and for tradies who hop around differing sites regularly, is a crucial factor in maximising you claim. What if I don’t have or want to keep a logbook? In this case, you can keep a more basic log of your eligible travel, and claim at a rate of 85 cents per kilometre (2024 financial year rate), up to a maximum of 5,000 work related kilometres. | This is a deduction of $4,250 with fairly minimal record keeping required.

TOOLS The next big-ticket item for tradies is tools.

The simple factor here is that you must use the tools for work related purposes. If you buy a tool for home that you occasionally use for work, you are only able to claim a portion of the cost. For employees, if the cost of each tool claimed is less than $300, you get a full deduction in the year of purchase.

If the cost of any individual tool is more than $300, then you must claim it over a number of years (an accountant can assist in determining how many years each tool needs to be claimed over, as every item is different). IMPORTANT: You can’t claim deductions for tools that are supplied by your employers.

For sole traders operating under and ABN, you will get a full deduction in year of purchase for any eligible purchase under $20,000 through the Immediate Asset Write Off rules.

CLOTHING, LAUNDRY AND OTHER PROTECTIVE EQUIPMENT The key here is that everyday clothing is NOT deductible. What you CAN claim is purchase and laundry costs to keep clean any protective items that you wear, including:

• Steel-capped boots

• Safety glasses

• Fire proof clothing

• Sun protection (sunscreen, sunglasses and hats for tradies who work outside for extended periods of time)
  

WORKING FROM HOME For tradespeople who do some element of their job from home (such as quoting/pricing up jobs, invoicing/admin or any other management type tasks), you may also be eligible to claim some of the costs of running your home office. Keep an eye on our website for an upcoming article about this or feel free to get in touch, as there are some recent rule changes that require consideration in this space.

OTHER DEDUCTIONS Beyond the big ticket items noted above, there are a number of other potential claims including overtime meal expenses, union fees, licenses and regulatory permits, white card fees and more. The best way to ensure you have considered all your options is to spend some time with an experienced tax agent who can talk through your unique scenario and make sure you are claiming everything you are entitled to.

If you wish to enquire with myself or my business partner Jayden for assistance with any tax related queries you have and completion of any lodgments with the ATO, you may do so from the contact page of the JET Accounting & Advisory website. You can also contact us directly by emailing enquiries@jetaa.com.au.

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Written by Ben Audino