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.
- 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.
- 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.
- 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.
- 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.
- 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.
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 firstname.lastname@example.org or P 1300 854 159.