If you work in a particular trade that involves manual labour then you are undoubtedly a tradie…or trades person.
Any financial outlay that you have in order to be able to carry out your job is classed as an expense. Tradies have many costs in doing their business, including transport, tools and safety or particular types of clothing.
That’s why people who are tradies by profession need to be on top of maximising tax deductions, whilst avoiding paying for items that you don’t really need – and that are sending you backwards!
You don’t need the best ute in the country – the more the ute costs – the more it costs you after tax – that’s going backwards and makes no sense!!
Sometimes it is better to keep the after tax money in your pocket so that you can get yourself into a better position to borrow money for a house or investments in the future.
If you are an individual or business, the most important thing to remember is keep all your receipts and good records of expenses, and be honest as you can to keep the tax man away!
Here are some ideas of what is available to tradies to claim as a tax deduction:
If you need to use tools to make a living, then you can claim them as a deduction. In most trades just about every tool you own helps you do your job so lucky for you!
If you are a small business, you may be able to take advantage of the small business tax breaks that were handed down in the Federal Budget in May 2015. The $20,000 small business tax breaks assist businesses that turn over less than $2million dollars by allowing them to claim 100% of the cost for pieces of equipment (tools) purchased for a cost up to $20,000 each. You can claim this for as many individual items as you like from now until June 2017.
Just remember if these tools are not only for work purposes, you may need to claim only the work related percentage of their value.
Protective clothing can be clothes or footwear that is used to provide protection from your daily work duties. It is protective in that it helps you stay safe and prevent damage to your body or possessions.
Sunglasses and protective eyewear
If you work outside, sunglasses can be claimed as ‘sun protection’ expenditure.
To be able to claim sunglasses as a deduction your job needs to involve actual outdoor labour and the glasses should have been bought for protection whilst on work duties, not fashion and looks.
Remember, keep your receipts!
Transport to and from jobs (when carrying tools)
If your trade requires you to transport your tools to and from a site, you can claim the cost of transport. This might mean car expense running costs (like petrol, repairs, registration and insurance) or public transport.
If you travel interstate, overseas or anywhere else for the purpose of learning or developing your trade; you may be able to claim a deduction for the costs. Again you will need to keep adequate receipts and proof that the travel or trip was related to work.
If you use your mobile phone to make and receive business calls, you can deduct your mobile phone contract. Just be sure that if you are using the same number for business and personal use that you will need to be able to separate out the business side of your out of pocket expenses.
Insurance specific to your trade
If you have public liability insurance or other forms of protection that benefit your customer or employer, this too is tax deductable as it is an expense carried out in order to perform your job.
Do you wear a uniform? Laundry and dry cleaning can be claimed as an expense
If you are forced to wear a uniform, you are able to claim the cost of laundering it. Think company shirts and other clothing that has company name/logo on it. Talk with your accountant about what and how to claim this expense.
Union fees and association fees are tax deductable for tradies
If you are a member of a union or perhaps a professional association related to your profession, all of the fees and charges are tax deductable.
Staying organised as a tax efficient tradie
The better organised you are with keeping receipts and sound records the less tax you are likely to pay come end of year. There is a variety of options when it comes to accounting software and applications. Keep in mind that some receipts, like Bunnings for example, fade dramatically when left in the sun or in a glove box. Having a simple way to keep a photo of the receipt can save you a lot of time and hassle at tax or BAS time.
Remember your tax deductions are legal….just keep yourself organised. Claim what you can, always use an accountant and you will quickly realise just how beneficial working as a tradie really is when it comes to claiming deductions and expenses.