29th June, 2018
Every end of financial year tradies prepare their tax returns, and sometimes a big dose of hope comes into play about what can be deducted. Want to avoid the ATO fishing you out?
From tools of the trade to travelling back and forth from various jobs, getting a handle on what you’re entitled to and what’s off the list can be a bit tricky.
With the ATO fine-tuning its systems every day, it’s getting harder for claims to slip past the net.
Definitely talk to your bookkeeper or accountant about your situation, and it won’t hurt to have everything booked through your online accounting software, but here are four common ways tradies get stuck at tax time.
The information contained in this article is of a general nature only and intended for Australian audiences. For advice particular to your circumstances, please see a tax professional.
This is something that trips up a lot of tradies – you can’t claim travel expenses between your home and worksite. That includes side trips like dropping off the kids at school or picking them up.
There’s also a clear difference between what the ATO defines as a ‘car’ and what it terms as a larger vehicle. It’s important to get this right because what type of vehicle you have relates to what you can claim.
If your vehicle fits these categories:
• One tonne or more, such as a ute or panel van
• Designed to carry nine passengers or more
…you can claim a proportion of expenses (fuel, oil, insurance etc.) for what you use specifically for work.
Note that, according to the ATO, you can’t use the cents per kilometre claiming method for these larger vehicles, so keep all your receipts.
You can’t claim expenses on plain clothing worn at work – even if your boss or site manager told you to wear plain clothing.
This is where a lot of tradies fall down, as they claim expenses for cleaning both plain clothing (jeans, T-shirts and the like) and more specialised clothing such as hi-vis gear.
Luckily you can claim expenses for buying or mending costs for clothing unique to your job.
This extends to things like company-issued polo shirts and safety equipment like hi-vis gear and steel-capped boots.
But if you’ve already been reimbursed by your boss for these costs, then you can’t claim this expense again.
The big thing here is that you can’t claim expenses for tools and equipment that you use privately.
You also can’t claim for tools provided to you by your employer or another person.
When it comes to tool costs, if it’s more than $300 (and you paid for it) you can claim the cost of the tool over a number of years (taking in depreciation).
But if the tool costs less than $300, you can claim a deduction for the whole cost upfront.
Here’s where it gets interesting.
If you can prove that you use your tools both at home and on the job, you can claim expenses for the proportion of their professional use.
What does that mean? Well, if you use your tools 50 percent of the time on site and 50 percent at home, you can claim 50 percent of the expenses for those tools. It’s important you can prove to the ATO that this is the case.
You can also claim the cost of tools that you need to use for your job.
There are a raft of things you can reasonably claim as an expense, such as phone costs.
But the key thing is that you can only claim the work-related part of the expense. So if you really use your phone to make work calls 20 percent of the time, you can only claim 20 percent of the phone-related costs.
You can claim for protective equipment you use at work including sunscreen or sunhats, as well as things like union fees.
You can also claim a deduction for travel-related costs such as meals and accommodation if you had to travel overnight for work.
But remember, if your employer paid those expenses or reimbursed you, you can’t claim them.