Tradie Tax Deductions: What You Can Claim
Hey, tradies! Do you claim your deductions from the Australian Taxation Office? We get it; You’re busy. With so many work demands that you need to meet, sorting out your tax returns and knowing which ones to claim for tax deductions can be a bit overwhelming.
But hey, you should get everything back you deserve at tax time because as a tradie, you often pay for work-related expenses out of your own pocket. If you don’t claim your tax deductions, you would end up paying too much tax and missing out on hundreds or thousands of dollars worth of claimable expenses every year.
This tax time, find the time to identify all the tax deductions you can claim as a tradie as you’re completing your tax return.
Employee Tradie Vs Small Business Owner
These deductions depend on whether you're an employee tradie or an owner of a small business (sole trader, partnership, company or trust).
As an employee tradie, you can claim a deduction for expenses incurred 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.
Meanwhile, if you run your own tradie business, you can claim business expenses if:
- The money has been spent on your business and not a private expense
- You have a record to prove it
If the expenses were for an asset or service for a mix of business and private use, you can only claim the portion that is related to your business.
Common Tradie Tax Deductions
1. Vehicle Expenses
Vehicle purchases and costs associated with operating your vehicle are claimable when you can prove they are for business purposes and you don’t receive a car allowance. Under the logbook method, you need to show odometer readings for at least 12 continuous weeks. Mileage tracking allows you to claim the percentage of vehicle expenses apportioned to business use, including running costs and depreciation.
Under the cents per kilometre method, you can claim $0.66 per kilometre on up to 5000 kilometres of business travel.
There is a car limit that applies to passenger vehicles designed to carry a load less than one tonne and fewer than nine passengers, except a motorcycle or similar vehicle. The limit is $57,581 for the 2019–20 financial year.
If you purchase a car for your business and the car limit applies, your deduction under the instant asset write-off is limited to the business portion of the car limit. For example, if you use your vehicle for 75% business use, the total you can claim under the instant asset write-off is 75% of $57,581, which equals $43,186.
2. Travel Expenses
Travel expenses, such as meals, accommodation, flights or taxi fares, are deductible if you can show receipts and have not been reimbursed or given a car allowance. If your vehicle is under a novated lease, your employer is eligible to claim vehicle expenses.
3. Tools, Equipment and Other assets
GST credits are offered for the cost of tools, equipment or assets purchased to operate your business. For an item that costs up to $300, an immediate deduction can be claimed. Where the cost exceeds $300, you can claim a deduction on the item’s decline in value.
4. Tools and Equipment Repairs
Expenses involved in repairing or insuring your tools and equipment can be claimed too, as well as any interest charged on money borrowed to purchase the items. If you use these items for both work and personal use, you’ll need to show a diary that specifies how it’s used, so the deduction can be apportioned correctly.
5. Protective and Occupation-specific Clothing and Accessories
If you buy certain protective clothing or items for your work, such as hard hats, sunglasses or steel-capped boots, you can claim them as a deduction. This also applies to occupation-specific clothing needed to distinguish you from the public, like a uniform.
6. Laundry and Dry Cleaning
You can even claim GST credits on costs associated with cleaning your work clothes. If this expense exceeds $150 and other work-related expenses total more than $300, you need to provide receipts. Otherwise, a reasonable basis for calculating your laundry or dry cleaning deduction is $1 where the whole load is work clothes or $0.50 where it is partially work clothes.
7. Training Courses, Licences and Certifications
Any training courses, licences or certifications you undertake to maintain or improve your skills, or that certify you to perform a task for work, are tax-deductible. Courses that are not generally related to your work or new employment are not eligible.
8. Union and Association Fees
You can claim any union fees or subscriptions to trade, business or professional associations. Most unions provide members with a statement of fees or subscriptions paid, which you can use to prove your association in your return.
9. Mobile and Internet
When you pay for work-related phone or internet expenses, include the cost in your return. If you plan to claim more than $50, you will need to determine the percentage related to work use over a four-week representative period, which can then be applied to the full income year. Records can be kept in the form of diary entries, electronic records, or bills.
10. Cost of Managing Tax
Costs related to lodging your tax return are deductible as well. This includes your accounting software, tax agent fees, any travel to tax advisors, appeals to the court about tax affairs or interest charged by the ATO. These costs are considered to be incurred in the year they are paid.
Best Time for Tax Return Filing
Generally, late July 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.
Every trade business is different, as is every tax return. To maximise your deductions and save this financial year, you must understand what you’re eligible for. If you’re still unsure, speak to an expert advisor.