TAX RETURN TIPS FOR TRADIES TOOLS AND EQUIPMENT DEDUCTIONS
As a tradie you probably have paid and use many tools as part of your job or business. Anything you’ve paid for that you use for your work is deductible on your tax return.
There are a few important differences on what you can deduct depending on if you own your own business or work for someone else.
As a business owner, you may immediately deduct the cost of all tools and equipment costing less than $30,000 as of April 2, 2019. If you purchased tools or equipment between January 29, 2019 and April 1, 2019, you may deduct items costing up to $25,000. If you purchased tools or equipment before January 29, 2019 you may deduct items costing $20,000 or less.
Self employed tradies can make deductions immediately against their income with the same rules as business owners.
Employed tradies are more limited in what they can deduct. Immediate deductions for tools and equipment you purchase is available, but only to a maximum amount of $300. If the purchase is over $300 you will have to deduct the cost over several years in the form of depreciation. Be cautious when buying a set of tools, instead of buying tools individually. If the price of the tool set is over $300 you will have to make deductions over several years.
For example: If you purchased a tool for $400 brand new, but after one year you would only be able to sell it for $300, your tool has depreciated by $100 and you would be able to deduct $100 on your tax return for that year.
Tools and equipment are not the only thing claimable. Equipment for an office such as computers, phones, printers, pens and furniture is also claimable under the same rules.
It is important to remember that if you also use the equipment for private use, the cost of the tool must be divided based on how often it is used privately or for work.
For example, if you paid $300 tool which you use 80% of the time for work and 20% of the time for personal projects, you would only be able to deduct a total of $240 (which equals 80% of the value.)
VEHICLE DEDUCTIONS
The cost of a vehicle which you use in your business or for your job may also be claimed if you paid for it. Deductions for work-provided vehicles do not apply.
As a business owner, you may write off the full amount of a work vehicle up to a maximum of $30,000. If the vehicle costs more than $30,000 you will have to write off the cost as depreciation over the lifetime of the vehicle.
Employees can claim depreciation on their vehicle over the vehicle lifetime. However, all claims must include a logbook of your work and private use of the vehicle. All expenses related to your vehicle such as fuel and servicing should be included in this log for maximum deductions.
If you travel less than 5000km in the year, however, you may instead claim a set allowance of 68 cents per km travelled on business related trips.
The costs of travelling from home to work in your vehicle are almost never claimable. The one exception is if you transport heavy tools or bulky equipment in your vehicle when driving from home to work and there is no safe place to leave them at work overnight.
WORK-RELATED CLOTHING
If you are required to wear a uniform or protective clothing for your job you are entitled to claim a tax deduction on both the cost of purchasing an item of clothing and any expenses related to laundering, dry cleaning or alterations.
Any type of protective clothing or footwear that protects you from the risk of illness and injury or that prevents damage to your ordinary clothes while working is claimable.
In general it is claimable if:
- It is designed to protect you from extreme conditions and regular clothing is inadequate.
- It is designed to protect you from injury such as heavy duty shirts, trousers and steel-capped boots.
- It has a dense fabric which gives you a high enough UV rating to protect you from the sun in an outdoor environment.
Some of the things you can claim are:
- Non-slip safety shoes
- Overalls
- Fire-resistant clothing
- Safety-colored vests
- Gloves
- Steel-capped boots
- Hardhats
- Heavy duty shirts and trousers which are rip resistant
- Items with reflective strips
- Required work uniforms which display a company logo
- Sun protection accessories such as sunglasses, hats and sunscreen when working outdoors.
LAUNDRY AND DRY CLEANING
Expenses related to washing, drying, ironing or dry cleaning work clothes are also eligible to be claimed on your tax return.
The ATO also allows deductions for any washing, drying and ironing you do yourself. The deduction rates are as follows:
- $1 per load for washing, drying and ironing (for loads containing only work clothes)
- $0.50 per load if the load is a mix of work and personal clothing
You may or may not need to keep records to prove these costs.
You do not need to keep a record of your laundry expenses if the total laundry expense is $150 or less and your total work-related expenses are $300 or less. You do need to keep a record if you claim more than these amounts on your tax return.
DECK CLEARING
If you are a business owner you can claim a tax deduction on any obsolete, damaged or unusable materials left on your site by writing it off before the end of the year.
You can also write off unpaid debts that your business may incur. If a customer cannot or does not pay an invoice that is due, and you do everything possible to take payment without success, you can write off the amount by June 30 as a bad debt deduction claim. All bad debt deduction claims should have a record of being written off in the form of a Board Minute or similar record
To benefit the most from your deductions and get a maximum write off make sure you:
- Keep organized records which include invoices and receipts. Even if you are not sure about an expense, save it anyway and let our expert tax return agents decided if it is eligible or not.
- Talk to a specialist about your unique situation. There may be expenses which relate to your work and are not listed here. Make sure you get it right and keep more of your hard-earned money!