Turbo-charge your trades business with these tax tips
Turbo-charge your trades business this End of Financial Year with these simple tips and tools so you can save both hours and dollars in what can be the most painful time of year, writes Amanda Gascoigne.
Early starts, long days. As a tradesperson, you work hard and the last thing you want to do when you get home is paperwork.
Unfortunately, it’s a necessary evil. But there are ways to make life simpler.
To help you, this article will cover the following areas of interest:
- Ways to save tax this year
- Tools to save time and money next year
- How to have better conversations with your accountant
The critical way to save at tax time is to have great recordkeeping processes, but we’ll go through that in the next section.
For now, here’s a list of some of the big-ticket tax claims you can make, including a few that get missed or overlooked by many tradies.
Utes and work vehicles
Make sure you’ve kept all your receipts for fuel (check under your seat), registration, insurance, repairs, lease and repayments, as you can claim your business proportion of these expenses.
If you haven’t kept a logbook or the one you have is more than five years old, start another one now and use it for 12 continuous weeks. Doing so will help your accountant maximise your claim.
It’s quite common that another family vehicle is used by yourself or your partner for running business-related errands, picking up supplies at short notice and creating quotes.
These trips add up and you can claim 68 cents per kilometre up to a maximum of 5000 kilometres in your 2019 tax.
Keep a logbook in this vehicle and write down all trips made during the year. Provide this to your accountant at tax time and they’ll work out the rest.
Tolls, parking and car washing are expenses many tradies forget to give to their accountant, so spend some time going back through your records and your e-tag accounts to isolate these expenses so you can claim this year.
Other travel expenses like meals and accommodation when working away can also be claimed.
Tools and other equipment used in your business
These assets will last years and years, but for your 2019 tax, the ATO will let you immediately write-off assets that cost less than either $20,000, $25,000 or $30,000 depending when you purchased the asset.
Your accountant will do all the heavy lifting here for you here and will calculate the depreciation of any assets purchased over these thresholds.
Protective clothing and PPE
You can claim the cost of purchasing and laundering clothing and footwear for yourself and your staff to protect yourselves from the risk of illness or injury, including fire-resistant and sun-protection clothing, safety-coloured vests, steel-capped boots, gloves, overalls, and heavy-duty shirts and trousers, as well as things like rubber boots for concreters.
You can also claim the cost of personal protective equipment (PPE) that protects from the risk of injury or illness posed by your work or your work environment, such as hard hats, safety glasses, sunscreens, sunglasses and hats.
Work Health and Safety
The costs associated with ensuring your business complies with work health and safety obligations will also be deductible, including paying to have your safety management system developed and implemented and all safety equipment purchased.
In this regard, you should also check if you might be eligible for a WHS small business state government grant.
Fees, licenses and training
In this case, think union fees, membership fees, contractor licenses, white cards, courses and inductions for yourself and staff.
Mobile devices and tablets
The business proportion of these expenses can be claimed, so be sure to discuss any purchase of this equipment with your accountant or tax agent.
Home office expenses
You can claim a fixed rate of 45 cents per hour for heating, cooling, lighting and the decline in value of furniture in your home office for the number of hours per week you spend doing your paperwork including admin, bookkeeping, preparing quotes and paying bills.
You can also claim the business proportion of your home phone and internet if you use that for business.
A lot of tradies do have income protection, but they forget to give this to their accountant.
Ask your financial advisor to send through your annual premiums to your accountant or chase them up in early July.
There are special rules here, so you should check with your accountant or your financial advisor. But I want to flag it as it’s often something that is overlooked.
Remember, if you were working for someone else you would be getting 9.5 percent compulsory superannuation paid for you, so it’s important to think about your future and the big picture as to why you are working as hard as you are.
So here we are at recordkeeping. Sounds dry doesn’t it? But the fact is, whether it’s you, your bookkeeper or your partner that’s managing the books, a streamlined process with best-of-breed tools will always result in the best outcomes for your taxes and your business overall.
Compare the following against how you’re currently managing your business and consider which changes will have the most positive impact if they were to change. This way you’ll prioritise the enhancements you need make.
Dedicated bank accounts and credit cards
Mixing business and personal expenses in the one account just muddies the water. And because there are so many transactions, it’s easy to miss some of the important business ones.
Having dedicated cards and accounts can also be useful when monitoring your cash flow and when your business account is getting low it might help you chase money owed to you quicker.
Online accounting software
This is something every business should have, so bite the bullet and get signed up and online for 1 July 2019.
Modern accounting software is affordable, and the benefits far outweigh the expense.
Good accounting software is mobile, allowing you to invoice faster and, ultimately, look more professional than anyone doing things the old way.
Invoice reminders can even be sent out while you’re sleeping to get you paid faster. And you’ll be able to see all your business financials at the tap of a button.
Say goodbye to fading receipts and avoid your bookkeeper’s wrath
How much time do you spend trying to find receipts under your ute seat, glovebox, job site and then only to find them unreadable?
Well, with MYOB’s Capture App for Essentials this will never be a problem again – you just take a photo of your receipt with and iOS device and send it to your accounting file in a matter of seconds.
This simple, new process will help you stay on the right side of the law, as well as the right side of your bookkeeper or tax agent.
There are hundreds and hundreds of apps that can be used to help you run your business better and that integrate with accounting software, saving you time, money and stress.
There are industry specific apps that will automate a wide range of tasks you now do manually including quoting, job management, invoicing, bill payment and time tracking just to name a few.
Assuming you know what business information to share with your accountant and have the best tools in place to do so, you’ll next want to think of ways to gain more value from the relationship you have with them.
After all, your accountant can do so much more than simply process your tax information. The right accountant should be a valued advisor to your trades business.
Pick up the phone and see if you need to sit down and have a tax planning meeting to get a concrete plan of what you need to do before 30 June to save tax.
Compile a list of things from above to discuss further. If it’s expected that you will have a tax bill, it will also give you an idea of what to expect.
Single Touch Payroll (STP)
The biggest change to the tax system since GST is coming on 1 July for small employers and your accountant will be able to explain more and help you get ready.
If you want to claim a deduction for superannuation this year, monies need to be received by your or your employees’ fund before 30 June 2019, so check with your accountant whether you should be paying any super in June.
If you’ve any monies outstanding for employees I’d recommend speaking with your accountant to devise a plan to get on top this before you start STP reporting.
I recommend that you have this and a system that will improve your recordkeeping and bookkeeping all ready to roll on 1 July.
Don’t be scared to tell your accountant what your financial and lifestyle goals and they will help you crunch the numbers to help you achieve it even quicker than you thought.
Budgeting will also help you with your pricing and your monthly targets for the new financial year.
Do you know how your expenses and profitability compare to others in the industry and to ATO benchmarks for your industry?
Is your current business structure still appropriate or would a different one save you tax and offer greater asset protection?
Often forgotten so make sure your accountant has all your details and is updating your service and taxable earnings each financial year.
With all that in mind, it’s time to get started on beefing up your business so that you can nail tax time in 2019.
The information provided here is of a general nature for Australia and should not be your only source of information. Please consult an experienced and registered tax agent as each small business’ circumstances will vary for end of financial year.