Tax deductions for tradies
Tradies – be certain about what you can claim
If you're a tradie, be certain about what you can claim on your tax return.
What you can claim depends on whether you're an employee tradie or a small business (sole trader, partnership, company or trust).
Further information https://www.ato.gov.au/General/Tradies---be-certain-about-what-you-can-claim/
On the taxation office page:
- Buying assets for your small business
- Claiming deductions this tax time
- Protective clothing
- Buying tools for work
- Transporting bulky tools for work
- Record keeping
- The best time to lodge
Buying assets for your small business
If you are a small business owner, under the instant asset write-off you can immediately write off assets purchased for your business that cost less than the relevant threshold amount.
You may purchase and claim a deduction for multiple assets provided each asset costs less than the relevant threshold.
Examples of assets include:
- drills
- electric sanders
- electric saws
- grinders
- leaf blowers
- lawn mowers
- nail guns
- ladders
- tool boxes
- work lights
- high-pressure water cleaners
- concrete mixers
- computers, laptops and tablets.
This deduction applies to most assets, whether the asset you bought is new or second-hand. You claim the deduction in the year the asset was first used or installed ready for use.
Assets you purchased for the relevant threshold amount or more are deducted over time using a small business pool.
Watch:
See also:
- Simpler depreciation for small business
- Eligibility – work out if you're a small business entity
Claiming deductions this tax time
What you can claim depends on whether you're an employee tradie or a small business (sole trader, partnership, company or trust).
Employee tradies
You can claim a deduction for expenses incurred as an employee tradie if:
- you spent the money yourself and were not reimbursed
- it was directly related to earning your income
- you have a record to prove it.
If your expense was for both work and private purposes, you can only claim a deduction for the work-related portion.
Small businesses
To claim business expenses:
- the money must have been spent for your business (not a private expense)
- if it is for a mix of business and private use, only claim the portion that is related to your business
- you must have a record to prove it.
Protective clothing
Employee tradies
You can claim a deduction for:
- protective clothing your employer requires you to wear (for example, hi-vis vests and steel-capped boots)
- protective equipment such as safety glasses, sunscreen, sunhats and sunglasses where you are required to work outdoors.
Small businesses
You can generally claim a deduction for:
- protective clothing (for example, hi-vis vests and steel-capped boots)
- costs for safety glasses, sunglasses, sunhats and sunscreen when your business activities require outdoor work.
Buying tools for work
Employee tradies
You can claim a deduction for tools or equipment you are required to buy for your job. If you also use the tools or equipment for private purposes, you can’t claim a deduction for the private use.
You will need to work out what percentage of the use of the tools is work-related and only claim that amount. If the tools or equipment are supplied by your employer or another person, you can’t claim a deduction.
If a tool or item of work equipment you only used for work:
- cost more than $300 – you can claim a deduction for the cost over a number of years
- cost $300 or less – you can claim an immediate deduction for the whole cost.
See also:
Small businesses
You can claim a deduction for most costs you incur in running your business. This includes assets, which you can immediately write-off if they cost less than the relevant instant asset threshold, for example:
- drills
- electric sanders
- electric saws
- grinders
- leaf blowers
- lawn mowers
- nail guns
- ladders
- tool boxes
- work lights
- high-pressure water cleaners
- concrete mixers
- computers, laptops and tablets.
Assets you purchased for the relevant threshold amount or more are deducted over time using a small business pool.
You may also be able to claim additional items as operating expenses. For example:
- drop sheets
- masking tape
- gaffer tape
- oil
- replacement belts for machines.
See also:
Transporting bulky tools for work
Employee tradies
In limited circumstances, you may be able to claim the cost of trips between home and work. One of these is if you carry bulky tools or equipment for work (for example, an extension ladder), as long as:
- your employer requires you to transport the equipment for work
- the equipment is essential to earning your income
- there's no secure area to store the equipment at the work location
- the equipment is bulky – at least 20 kg – and difficult to transport.
If you claim car expenses, you must either:
- keep a logbook of your work trips
- be able to show us your claim is reasonable if you use the cents per kilometre method (for claims up to 5,000 km only).
Your vehicle is not considered to be a car if it is a vehicle with a carrying capacity of:
- one tonne or more, such as a ute or panel van
- nine passengers or more, such as a minivan.
In these circumstances – for example, if you use a ute – you can claim the proportion of your vehicle expenses that relate to work. Examples include:
- fuel
- oil
- insurance
- repairs and servicing
- car loan interest
- registration
- depreciation.
Keep receipts for your actual expenses. You must use a log book to show work-related use. You cannot use the cents per kilometre method for these vehicles.
See also:
Small businesses
As a small business, you will be able to claim motor vehicle expenses to the extent the vehicle is used in carrying on your business.
Watch:
See also:
Record keeping
Employee tradies
To claim a tax deduction, you must be able to show:
- that you spent the money
- what you spent the money on
- who the supplier was
- when the purchase occurred.
Bank or credit card statements usually won’t contain this information.
If your work-related deductions are more than $200, you must have records to support your claims. Records are usually a receipt from the supplier of the goods or services.
The receipt must show the:
- name of supplier
- amount of expense
- nature of goods or services
- date the expense was paid
- date of the document.
After you've lodged your tax return for the year, you must keep your records for a minimum of five years.
If you're claiming for the cost of a depreciating asset used for work – such as a laptop – you must keep purchase receipts and a depreciation schedule or details of how you calculated your claim for decline in value, for five years following your final claim.
Small businesses
You need to keep records that substantiate your business income and expenses.
Your records must:
- explain all transactions
- be in writing (electronic or paper)
- be kept for five years (some records may need to be kept longer).
Depending on your tax obligations, you may also need to keep records for GST, fuel tax credits and records relating to your employees and contractors.
You can keep your business records electronically or on paper, but keeping electronic records makes some tasks easier.
Watch:
See also:
The best time to lodge
Generally, between mid-August and September is the best time to lodge to take advantage of the pre-fill information available in myTax (or with your tax agent).
Pre-fill information is the data we already have on our systems plus the information provided to us by third parties, including your employer, banks, government agencies and private health insurance providers.
If you wait for pre-filled information to be available before completing your tax return, all you have to do is review the information and add any missing details or update incorrect details. This way you're less likely to miss any income that you must include.
If you prefer to lodge sooner, you’ll need to ensure you declare all your income. This includes income from any cash jobs, the sharing economy, your second job, foreign sources and capital gains.
