As the deadline for filing taxes approaches, tradies across Australia must prepare their paperwork to lodge their tax returns. For many, this will involve claiming tax deductions for work-related expenses. This process can be particularly tricky if you don’t know what expenses you can claim. That’s why we’ve created this quick guide to help you with your tax deductions.
What tax deductions can you claim?
To claim a deduction, the money you spend must be directly related to your work. There are a number of deductions that tradies can claim, including:
1. Tools and equipment
The Australian Government has extended the temporary full expensing programme until 30 June 2023. The programme allows businesses with an aggregated annual turnover of less than $5 billion to deduct the full cost of depreciating assets used for work.
A depreciating asset refers to items that have a limited life span and tend to decline in value over time. Examples of depreciating assets include computers, tablets, vehicles, and heavy machinery. According to the Australian Taxation Office (ATO), both new and secondhand assets used or installed between 6 October 2020 and 30 June 2023 are eligible. However, only companies with a turnover of less than $50 million are eligible to claim a deduction on secondhand asset purchases.
What’s more, employed tradies can claim an instant tax deduction for tools and equipment worth $300 or less. Tools like power drills, ladders, calculators, and measuring instruments fall into this category. It’s also possible to claim a deduction on assets that cost more than $300 as long as there’s proof of depreciation. The ATO’s depreciation tool can help businesses and tradies calculate claimable deductions from depreciating assets.
2. Work-related attire
If your work requires you to wear a uniform or personal protective equipment, you can claim a tax deduction on these items. Here’s a list of work-related attire whose costs are tax-deductible:
- High-visibility jackets and vests
- Fireproof clothing
- Branded work uniform and steel-capped boots
- Sunglasses and sunscreen
Costs incurred from washing, dry cleaning, and clothing repair are also tax-deductible. If your total laundry expenses are over $150, you must have a written record or receipt for verification purposes.
3. Vehicle and travel
You can also claim deductions on vehicle and travel expenses incurred on the job. This includes fuel costs, tolls, repair and maintenance, insurance, and parking fees. When claiming vehicle expenses, you should keep a detailed record of your receipts. Certain private expenses like the cost of travelling between your home and place of work are not deductible, so it’s important to keep a travel log.
4. Training and education
If you undergo training relevant to your industry, you can claim a deduction for the cost of the programme. To be eligible for tax deduction, the training programme must be provided by an Australian registered trainer and paid in full within the financial year. The Australian Government is also offering an additional 20% deduction on the cost of training courses taken between 2022 and 2024. It’s therefore highly beneficial for tradies to take upskilling opportunities within the next couple of years.
5. Phone and internet
You can claim a deduction on the percentage of the cost of new smartphones or tablets. These deductions also apply to any calling and internet fees incurred during work. If you have a phone or internet plan, calculate the percentage of work-related use and only claim that amount. For example, if your annual data plan is $1,200 and you used 30% for work, you can claim $360 as a deduction.
How can tradies prepare for tax season?
Aside from knowing what can be claimed, tradies should keep detailed expense records throughout the financial year. The ATO requires businesses and individuals to keep records of their expenses for a minimum of five years. This includes receipts, bank statements, invoices, and any other form of documentation that can verify an expense.
There are many ways to keep track of work-related expenses, but one of the most effective methods is to use accounting software like Xero, QuickBooks, and MYOB Online. This type of software allows users to store electronic copies of receipts and calculate the depreciation of assets over time. When tax season rolls around, accounting software can automatically prepare and lodge tax claims to the ATO myDeductions app with a click of a button.
To further streamline tax deductions, you should consider integrating your accounting software with the WorkBuddy job management platform. By doing so, you can easily track work-related expenses and get the most out of your tax deductions. Book a free demo today to see how WorkBuddy can help you prepare for tax season.