Tax deductions for tradies
Tax is one of life’s certainties – and fortunately for tradies there are plenty of ways to reduce the burden. Grab the available deductions to ensure you are not paying more than your fair share to the ATO. You can surely use the money better to grow your business!
Clothing & equipment
Any work clothing that is protective, occupation-specific and mandatory can be claimed as a deduction. This includes steel capped boots, rubber soled shoes, gloves, fire resistant clothing, high visibility clothing, overalls, heavy duty items, safety goggles, masks and even sunglasses and sunscreen. Just about any tradesman will own at least some of those items, all of which are tax deductible.
Not only can you claim the cost of purchasing the items, but you can also claim the cost of cleaning, maintaining and laundry.
In addition to your clothes, your tools and equipment are deductible, regardless of whether you have purchased or leased them. This does not only include labour related tools, but other work-related items like laptops and even vehicles like utes and trucks if they are necessary for your work.
Any travel undertaken in the course of work, excluding travelling to and from work, is tax deductible. Travelling between worksites, picking up supplies, travelling to meetings and to visit clients are all included, as is travelling from home to work if you commenced work that day at home. The expenses you can claim include tolls, parking, fuel, running expenses and the cost of any public transport or taxis used.
Even better, if you have travelled a long distance such as interstate or overseas for the purpose of picking up new skills or improving your existing ones, these travel expenses are also partially deductible.
You can even claim your travel from home to work, and vice versa, as tax deductible—if you are transporting bulky equipment. For this to apply, there must be nowhere to safely store the equipment on site.
There are a wide variety of other expenses you can claim back. If you have public liability insurance, this is deductible, as are any fees related to union membership, and any donations made to charities over $2 provided you did not receive anything in return, plus the cost of meals purchased while working overtime.
The cost of any training courses, licences, certifications, and magazines related to your profession are deductible. As are the proportion of your mobile phone and internet bills that are used for work purposes, and even the fees you pay to your tax agent to prepare the tax return, including the cost of travelling to them.
As you can see, there is a huge and varied list of deductible expenses, but you need to be mindful of them year round to get the full benefit at tax time.
Being tax efficient
The key to being tax efficient is keeping consistent records of your deductible expenses. You need to keep receipts of anything you are intending to claim as a deduction, as the Australian Taxation Office can ask for proof of deductions if they total more than $300.
Failure to keep records of the deductions could land you in trouble with the ATO, or at the very least increase your tax agent’s bill as they have to sort out the mess. As with most financial matters, the most efficient way to handle your tax return is to involve a tax agent year round, to ensure you are getting the most out of your tax return.
For tradies, taking advantage of available tax deductions will have a major impact on profitability. And if you need extra finance to expand, talk to Prospa about how a small business loan could help.
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