Nobody likes completing a tax return but you have to do it, so you might as well get yourself the best possible outcome by claiming everything you’re entitled to. Here’s CGH Accounting’s guide to the top tax tips for tradies:
CLAIM TOOLS AND EQUIPMENT
You probably use a variety of tools every day and the rule is that if you’ve paid for them and you use them as part of your job or business, you can claim them as a deduction against your tax.
Exactly how you do that depends on whether you run your own business or work for someone else.
If you run your own business, you can claim a deduction straight away for the cost of all tools costing less than $30,000 (if acquired after 2 April 2019, before that the cost limit was $20,000 up to 29 January 2019 and $25,000 between 29 January 2019 and 2 April 2019).
For most self-employed tradies, that means that pretty much all your tools can be written off straight away against your taxable income.
If you’re employed by someone else, the rules are less generous. You can claim a deduction straight away for tools costing $300 or less but if the cost is more than $300, you’ll need to write off the cost over the life of the tool, which could be several years. Take care if you purchase a set of tools – you can’t claim each tool individually so unless the cost of the set is less than $300, you’re looking at writing off the cost over a few years.
It’s not just tools you claim either – the same rules apply to items of equipment for the office like computers, phones and printers as well as mobile phones and tablets.
Just remember to only claim the work or business use part of the cost. If you use the tools or equipment for private use, you’ll need to apportion the cost.
You can also claim the cost of a vehicle, such as a van or a ute, which you use in your business or for your job, provided you paid for the vehicle (so there’s no deduction for work-provided vehicles).
If you run a business, you can use the same $30,000 instant write-off tax break outlined above, provided of course the vehicle costs less than $30,000 (as many second-hand vehicles do). If it costs $30,000 or more, you’ll need to write it off over the life of the vehicle.
If you’re an employee, you can claim depreciation on the vehicle over its life, but only if you keep a logbook of your work/private use. Your logbook can also be used to work out your various other work-related vehicle deductions, such as the cost of fuel, servicing, etc.
Alternatively, if you travel less than 5000kms, you can simply claim a set 68c/km allowance for every business km travelled.
Remember, you can’t claim for the costs of traveling from home to work in your vehicle, unless your employer requires you to transport heavy tools which can’t be stored at work.
If your work requires you to wear either a compulsory uniform or protective clothing to keep you safe (or to protect the normal clothing you wear underneath), the chances are you’ll be able to claim a tax deduction both for the cost of purchasing the item and the cost of getting it periodically laundered or dry cleaned.
Look out for the following commonly claimed items by tradies:
- protective clothing and footwear to protect you from the risk of illness or injury, or to prevent damage to your ordinary clothes, caused by your work or work environment. This type of clothing:
- is made to cope with more rigorous conditions, where conventional clothing would be inadequate.
- is designed to protect you – for example heavy duty shirts and trousers, distinct from ordinary cotton drill trousers, shorts and short sleeve shirts that you might think are work wear but do not adequately protect you from the risk of injury or illness
- has a density of weave which gives a UV rating sufficient to protect you from the sun where your job requires you to work outdoors.
Amongst the things you could claim are:
- fire-resistant clothing
- safety-coloured vests
- steel-capped boots
- non-slip safety shoes
- heavy duty shirts and trousers such as rip proof items of clothing made with heavy duty mesh that are designed to protect you or items with reflective strips
- Compulsory work uniform branded with the employer’s logo.
- Sun protection costs including sunglasses and sunscreen if you work outdoors
LAUNDRY AND DRY-CLEANING
You can claim the costs of washing, drying and ironing eligible work clothes, or having them dry-cleaned.
If the total amount of your laundry expenses are $150 or less and your total work-related expenses are $300 or less, you don’t need to provide written evidence for your laundry expenses. Instead, for washing, drying and ironing you do yourself, the ATO allows you to use the following amounts to work out your laundry claim:
- $1 per load – this includes washing, drying and ironing – if the load is made up only of work-related clothing, and
- 50 cents per load if other laundry items are included.
CLEAR THE DECKS
If you’re in business and have any obsolete, damaged or unusable materials left on your site at the end of the year, write-off the cost before the end of the year in order to claim a tax deduction.
In addition, if you have customers who can’t or won’t pay and you have done everything possible to recoup the debt without success, write it off by 30 June in order to claim a bad debt deduction. Make sure to record the write-off in the form of a Board Minute or other similar record.
Two tips for making your taxes easy:
- Keep good records, including invoices and receipts. It makes completing your tax return easier and ensures you can claim for everything you’re entitled to.
- Ensure you use a tax agent like CGH Accounting. Tax is complicated and an agent can ensure you get it right.
Please Note: This is general advice. To learn more about the possibilities of claiming a tax deduction, please contact CGH Accounting.