17th August, 2018
From plumbers to electricians, to painters to carpenters, to builders and everything in between, tradespeople are undeniably handy men and women to have around… But that doesn’t mean they’re all that handy when it comes to doing the books – or tax.
As an experienced accountant, I’m going to be blunt here, tradies are not known for their record keeping, bookkeeping skills and love of numbers.
I mean have you seen the glove box of some tradies utes? It is like a filing cabinet on steriods.
If by chance you take the risk at opening the glove box, the crumpled receipts attack you from all directions. It’s my job to get this crumpled mess into working order – all while fielding some pretty curly questions.
So, what’s some of the sh*t we hear tradies say?
Now it’s not unusual for tradies to have utes. Throw the tools in the back, ladders, equipment – makes perfect sense right? What doesn’t makes sense is the ‘100 percent for work’ thing.
Especially when said ute has Deni ute muster stickers all over it, not to mention the high-powered spotlights that would only be used for fox/rabbit shooting. I may be a chick, but I grew up in the country and I know what those lights are for.
On paper this seems legit, but a guard dog must be an actual “rip your am off if you come near my tools” kind of dog.
So it was with huge surprise when I visited a tradie (quietly sh***ing myself that I was about to be attacked by a Rottweiler or something equally sinister), to instead be greeted by a one eyed, blind, deaf, fluffy terrier who wanted to lick me to deaf and couldn’t even jump into the ute in the first place.
You can claim costs for the guard dog, it just needs to be capable of…guarding things.
Sure thing, but to me this just screams “cash job”.
Builders need to be especially careful with this as often the invoice has the address of the job site on it, which makes the audit trail easier to follow than the Yellow Brick Road.
That’s not to mention the 27 pictures the builder uploaded to their social media showing off the completed project.
Cash jobs, where you are claiming expenses but not the income, open up a can of worms as your numbers will be out of whack.
Now, I must admit I am not a frequent shopper at David Jones, but I didn’t know they had a section for protective clothing and steel capped work boots?
Rest assured, the receipt tells a different story. A designer frock and heels for the partner won’t pass the “protective clothing” test.
Remember that any story you tell your accountant, the ATO can ask for proof.
If the receipt tells a different story, you’ll immediately be in hot water.
Often a tradie can find a couple of mates to help with a weekend job, and said mates will often accept mates’ rates.
OK so there are two issues I have with this – you need to pay them minimum wage plus all eligible on costs, and secondly you should be factoring in all costs for your staff (including superannuation) into the job.
So ultimately, whatever you are invoicing your clients covers your costs plus your profit margin.
You may even need to pay these staff overtime if they’re working weekends and penalty rates may apply. Just because they’re your mates doesn’t mean it won’t bite you in the bum down the track.
So tradies, hear it from me – you aren’t immune to ATO rules and regulations no matter how many cash jobs you do.
In fact, trades are always a hot spot for ATO audits, payroll investigations and instances where the cash economy proves the numbers just don’t add up.
Whilst you may have a work ute, one of its features should not be a storage system for your receipts.
Getting help and guidance from a qualified accountant or BAS agent in those early days, will really set your business up without the added headaches and stress of an ATO audit coming your way.