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Tradespersons’ Tax Deductions

Everyone has the right to claim tax deductions in Australia. A tradesperson can definitely claim deductions so you can maximise your tax refund. If you’ve just heard about this good news, lucky you! We know it’s tiring to comply with all those tax requirements but saving money should be your top priority. So, here are a couple of tax tips to help you maximise your tax deductions as a tradesperson.

1) Tools and equipment qualify as tax deductions.

How much have you spent on your tools and equipment? You’ve probably spent a lot of money for that. Don’t worry, using them for your business or for your job is good. What’s even greater is that you can use them as tax deductions depending on how you run your business or job. There are different ways to claim your tools and equipment.

  1. The first method is if you are running your business – If you have the receipts, you can claim tax deductions by using the cost of your tools and equipment you bought for less than $30,000. The tools should be bought after April 2, 2019. Previously, the cost limit is $25,000 between January 29, 2019, and April 2, 2019, and $20,000 before January 29, 2019.
  2. The second method is if you are a self-employed tradesperson – This means that you can directly deduct the cost from your taxable income. Since you bought all your tools and equipment, this is the best thing you can do to save money as long as you have the substantiation.
  3. Third, if you are an employed tradesperson – You can only claim tools costing $300 as tax deductions in the year they were purchased and for the full amount. If the tools are more than $300, you have to write it off over the tools useful life ie claim depreciation.

Note that tools and equipment qualify under this section. Your computers, phones, printers, and tablets can be used as tax deductions as long as they are being utilised for your business or job.

Equipment that you use for a proportion of personal purpose, the proportion of personal use is required to be deducted.

2) Vehicles as tax deductions

Yes, your vehicles can be used to maximise your tax deductions too! Just imagine spending a good amount of money for your ute or van. The cost may be prohibitive for some tradespersons but since you can claim it, no need to worry. If you use the vehicles for your business or job, here are the ways you can claim them.

  1. For tradespersons who are running a business – the same rule for tools and equipment applies. If your van/ute/car costs < $30,000, you can claim it 100% write off (less any personal use). However, if it’s more than the threshold, you have to write it off over its useful life.
  2. For those who work for someone else eg an employee – you can claim the depreciation of your vehicle as tax deductions. But, keep in mind that you need a logbook of your usage, whether personal or private so the ATO can distinguish how much you can deduct. Your logbook is used for all your Vehicle deductions eg work-related expenses attached to the vehicle such as fuel, maintenance, repair, and so on.

If you are on business travel, you can also claim your 68c/km allowance every time you travel up to a maximum of 5000km. Remember that the distance between your home and work can’t be deducted unless your employer requested for you to carry heavy tools that you can’t leave at work.

NB: Yes you receive an immediate write-off for a vehicle/equipment purchased under $30,000, but when you trade-in the vehicle the amount of the trade-in is taxable income as it is recouped depreciation.

3) Work-related clothing as tax refunds

Work-related clothing also qualifies as tax deduction. If you are wearing a uniform or protective clothing, which is very common for tradespersons, keep the receipts so you can deduct the costs.

Aside from the cost of them, you can also claim your laundry, dry-cleaning expenses and repairs.

 

Sounds interesting?

However, the ATO still evaluates the type of clothing being claimed. Some common types used by tradespersons as tax deductions:

  • Clothing that is made to survive work with dangerous conditions where normal clothing can’t be used.
  • Clothing that is designed to give protection like heavy-duty top and trousers. These types of clothing are unique from ordinary cotton drill trousers and shirts. Ordinary clothing cannot be used as uniforms.
  • Clothing that has a density of weave so to protect the worker from UV when the job is required to be done outside workplaces.
  • Protective clothing and footwear that give protection from injuries or illness.

Under this section, you can also claim fire-resistant clothes, gloves, hardhats, safety coloured vests, steel-capped boots, overalls, heavy-duty shirts and trousers, non-slip safety shoes, and required uniform with your company’s logo.

4) Laundry and dry cleaning of your uniforms and protective clothing.

Good news! You can now claim your laundry and dry-cleaning expenses for uniforms and protective clothing that qualify as tax deductions. If the total amount of your expenses reached $150 or less and your total work-related expenditures are $300 or less, no need for receipts. You can claim them right away.

If you are doing the laundry yourself, you need to keep this in mind: $1 per load claim if you are washing, drying, and ironing and $0.50 if there are other items other than uniforms and protective clothing.

5) Unusable items as tax claims

In addition to the above items, you can also claim any unusable, damaged, or obsolete items that are left on the site where you did your job as a business or as a tradesperson. You can write off the cost before the end of the year so you can maximise your tax deductions. Under this claim, you can deduct the cost of items that the customers did not pay for. Write off should be done by June 30.

 

 

To know more about claiming a tax deduction for any of your expenses, or for help filling out the paperwork, please get in contact with us at support@smbaccounting.com.au or P 1300 854 159.

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Maximising your Tax Deductions | Minimising your Tax Payable

Maximising tax deductions is every business’s/taxpayers’ goal. This is one way you can save from paying higher taxes than you need. But, let’s face it, this is one of the toughest things to do when you are running your own enterprise especially If you don’t know how the Australian Taxation Office (ATO) works.  So, is there any way you can avoid paying high taxes? Yes, there is! The greatest secret to counteracting this negative effect on your finances is to always keep your records. Your tax deductions will increase if you have more transactions with substantiation.

The Australian Taxation Office (ATO) has thousands of personnel who do tax collections. One way you can prove that you don’t have to pay all the tax they impose is to give them documents that support your claims, thus increasing your refund. If you can’t give them enough evidence, the ATO will keep their hands in your pockets. Note that claiming tax deduction without evidence is a big move and the ATO gets serious about it.

Don’t let ATO take away the money you’re supposed to count as yours. Don’t lose $$$’s like other Australians out there who don’t claim their tax deductions. You can do better than that!

Develop a habit of record-keeping

So to Maximise your tax deductions, the first step is to develop a habit of great record-keeping. It’s easy, just simply update your records with your receipts from your old to new transactions. Do not miss out on a single receipt! You need them all to claim your deductions so you won’t have to pay higher tax than necessary.

Take note, apart from proving your tax deductions, record keeping will save you a lot at tax time! If you have claims that make it questionable by ATO, you can simply hand them your complete receipts and show them that you are 100% ready no matter what happened.

Did you know that you can also use your receipts as references to your other business needs? Let’s say you are trying to estimate your income and expenses. Without these receipts, you won’t make a good outline of them. They serve as your support in case you need financial advice in the future. Record keeping is not just about saving tax time. It also helps you manage the other sides of your enterprise.

 

The next question is, what type of transaction receipts do you need to keep?

Type of transactions you need for tax refund

When keeping your records, you need to make sure that you are keeping the records of both your income and expenses. In this section, you will be given a list of the items that you may never had thought would qualify as tax deductions. Many Australians are failing to keep records of them for the mere reason that they don’t know that they could actually be used as deductions.

Let’s start off with your income. You must keep the records of your salary, any investment that you have, the dividends you receive from your investments, your managed funds, your allowances, and your rental income from your rental properties.

Some of the good records you can keep are your statement of income or earnings from your employer, funds manager, and real estate agent. Don’t forget to contact them for this document!

Next, you need to break down all your expenses into different categories. These are lists of items that can qualify as tax deductions:

 

  • Work-related travel – parking fees, tolls, personal car costs, public transportation fees, airplane tickets, general travel expenses, taxi fares, accommodation, meals.
  • General expenses – tax agent fees, charity donations, income protection costs, mobile phone usage
  • General work-related expenses – gifts, union fees, professional fees, license fees
  • Education expense – course fees, textbook fees, accommodation, meals, and professional fees for libraries and work related to magazines
  • Equipment purchased or leased for work – computer supplies, calculators, electronic organizers, computers, laptops, iPad, phones, mobile accessories, software, briefcases, carry-on bags, safety equipment, tools for the trade, technical instruments.
  • Home office expense – desks, chairs, office furniture, home utility fees, postage, stationery
  • Clothing – protective clothing, laundry of uniforms and protective clothing, uniforms
  • Costs of newly bought assets, expenses on rental properties and other investments, transactions of assets sold, and expenses related to attendant care, disability aids, or aged care.

 

Keeping of tax receipts

ATO recommends that you keep your receipts for 5 years under the following circumstances:

  • You recently claimed tax deductions for depreciation – you need to keep the receipt for 5 years from the date of your last claim.
  • You acquired or sold an asset – you need to keep your support for 5 years until after capital gains tax (CGT) is no longer required. You will need this document to calculate your capital gain or loss.
  • You are disputing about certain transactions with the ATO – you need to keep the documentation for 5 years after the dispute has been completed.

The era of digital technology, most records can be kept electronically and therefore will be usually kept indefinitely

At least 2 years of safe record-keeping is needed for taxpayers who have simple tax transactions generally Salary Wage employees

How to develop a habit of record-keeping

1) Always get a receipt

Whenever you are buying something or doing a transaction that has taxes, you need to ensure that you get an equivalent receipt of the expense. Even without categorising the expense, you can assess later on if the expense can qualify as a tax deduction or not. Keep in mind that without a receipt, you can’t file for tax deduction.

 

2) Keep a copy of your receipts

Some receipts will fade and you will lose some in the process of record-keeping. What you need to do is to keep a picture or scanned copy of the receipts after getting them. A soft copy will help you preserve the information in that document.

 

3) Organise your receipts

If you can organise your receipts in a chronological manner (date order or expenses category eg petrol receipts), just do it. You can either arrange it from oldest to newest or from newest to oldest depending on your preference.

 

4) List down your deductions

List down all your expenses and sum them up. You will have to categorise them this time based on the list of deductibles above. Do this regularly so you won’t face big job at year end tax time.

 

To know more about claiming a tax deduction for any of your expenses, or for help filling out the paperwork, please get in contact with us at support@smbaccounting.com.au or P 1300 854 159.

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