Employee Contractor

The things Tradies can claim tax on

Tax Breaks for Tradies: I’m a tradesman. Is it possible to deduct the course charge I paid to finish my course as a self-education expense?

If your study is work-related, you may be entitled to claim a deduction for self-education expenditures, according to the Australian Taxation Office (ATO). In rare cases, you may be required to lower your claim by $250.

You may be able to claim a variety of costs as a Tradie, from clothing and washing to tools and equipment. That instance, if the spending was directly relevant to your job and you were not paid.

It’s important taking a moment to make sure you’re getting all you’re entitled to during these difficult economic times.

Tradies labour long hours to meet tight deadlines, leaving little time or energy to consider finances and taxes.

As a consequence, many tradesmen overpay taxes, overlook legislative changes, or discover their cash flow isn’t as strong as they believed.

Working as a tradie may take you all over the place and frequently entails long hours of hard labour. The last thing you want to worry about at the end of the day is taxes, yet doing so might cost you hundreds, if not thousands, of money that you could otherwise recuperate come tax season.

It’s time to start thinking about what you can and can’t claim on your tax return now that tax season has arrived. The Australian Taxation Office (ATO) has provided some helpful hints to help employee tradies deal with some typical claims.

Finding the time to comb through all of the documentation, summarize your costs, and dig down that long-lost email from 11 months ago might seem difficult – and it’s easy to lose track of what matters and what doesn’t on your tax return.

However, if your deductions are correct, you might save a lot of money. If you have private hospital health insurance, you’re already ahead of the game when it comes to filing your taxes. Why? Because if you earn more than a particular amount and don’t have private hospital insurance, you may be subject to the Medicare Levy Surcharge (MLS), a 1-1.5 percent additional fee.

Many tradie business owners work overtime, so tax is typically the last thing on their minds. Unfortunately, many constructions, building, and electrical industry owners pay too much tax and miss out on hundreds of dollars in claimable expenditures every year as a result of this.

Getting a tax deduction for the cost of tools and equipment that you used to generate money during the year doesn’t have to be a nightmare any longer. Online Tax Australia can answer any queries you have and provide advise on what and how to claim these deductions.

It’s important to remember that some tools and equipment can be used for both commercial and personal purposes. The claimed amount must then be proportioned to reflect the correct expenditure claim. If you buy a new laptop and use it at work and at home, for example, you change your request to remember how much time you spend on job-related tasks and how much time you spend on personal tasks.

Tools and equipment that cost more than $300 cannot be claimed all at once since the expenditures must be claimed during the asset’s useful life (this is known as depreciation).

Keeping track of your costs and recording your receipts is definitely worth the work. It doesn’t take much to stay on top of things if you plan beforehand. A few minutes a day might pay you handsomely, beginning with your hip pocket.

Whether you’re an apprentice or a sole trader, tradies may take advantage of a variety of tax breaks.

For more information, please contact Bookkept  at Email: [email protected] or Phone: (03) 8568 3606

Employee Tradie

Even though you’re not the boss, you’ll be able to claim a variety of tax benefits if your company hasn’t compensated you and you can establish that you incurred the expenditure and that it was directly related to your employment.

Sole traders

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A lone trader is a self-employed individual who owns and operates their own firm. All facets of the business, including debts and losses, are legally the responsibility of the individual. Under this business structure, you can still hire people. Many craftsmen run their firms as single proprietorships.

When you’re a single trader, you can claim a variety of tax deductions. The difficulty is to be aware of all of them because even the most experienced single trader might miss out on a few tax breaks. It pays to know what you may claim when it comes to taxes.

You will be allowed to claim expenses as a small business. If you’ve spent money on your business or to recruit more business, you’ll be able to make a number of tax claims for professional services.

Tax Deduction for Tradies 

Protective clothing

Protective clothes or equipment can be deducted if they provide a sufficient level of protection against the risk of disease or injury caused by the activities you do to earn money, and the risk is not minimal or distant.

Tradies need protective clothing to do their jobs. Claimable expenses include high-visibility vests, hard helmets, gloves, and eyeglasses, as well as the cost of cleaning, repairing, and replacing the clothing. You may add sunscreen and hats to your claimable things if you work out in the sun.

According to the ATO, work clothes can be washed separately for $1 each load or with personal clothing for 0.50 cents per load. Because these fees accumulate, keeping a journal to track them is a smart idea.

Things Every Tradie Can Claim On Their Tax

Working from home expenses

Many of us have been working from home for a significant portion of 2020, and although there are several advantages (hello, track pants), it’s probable that you’ve accrued some home office expenditures. To assist you, the government has established a shortcut to claiming deductions, which will reimburse you 80 cents for each hour you worked from home between March 1 and June 30, 2020.

Income Protection

Income protection insurance is almost always tax-deductible, whether you’re a self-employed tradesman, a subcontractor, or just on salary. On the other hand, any benefits you receive from your insurance must be reported as income on your tax return and so liable to income tax.

For tradesmen, income protection is essential insurance. We deal with all of the top tradie income protection companies and can get you protected fast and with minimum paperwork. They can also give real income protection insurance, rather than just accident and illness coverage.

Whether you’re starting a profession, purchasing a home, getting married, or having a family, it’s critical to consider how you’ll secure the things that most to you. Income protection may protect you not just if the unexpected happens, but it’s also usually tax-deductible.

Sunglasses and sunscreen

When a worker is exposed to the sun during their workday, the ATO recognises sun protection tax deductions for sunglasses. In general, sunlight must be exposed for long or consistent periods of time. For example, a quick stroll between offices is not considered sufficient exposure. Sunglasses, on the other hand, become a necessity and hence a job-related tax credit if you work outside all day at a construction site or as a pilot dealing with the glare of sunshine every day.

It’s critical to protect oneself from the sun’s rays while you work outside, and the ATO agrees! The ATO permits you to claim the cost of sunscreen and eyewear if you operate in the sun on a regular basis.

Donations

Only gifts or donations to organizations with the status of deductible gift recipients are eligible for a tax deduction (DGRs).

The donor (the individual who makes the donation) is the one who may claim a tax deduction.
A deductible gift receiver (DGR) is a company or foundation that has registered to receive tax-deductible donations.

DGRs are not all charities. Crowdfunding initiatives, for example, have recently been a popular technique to generate funds for philanthropic organizations. Many of these crowdfunding platforms, however, are not administered by DGRs. These campaigns and platforms’ contributions are not tax-deductible.

We all strive to assist where we can, and you can claim a tax deduction on your return if you make a charitable gift of $2 or more during the fiscal year.

Keeping track of all tax-deductible gifts and contributions is a smart idea since it will make claiming that much easier.

Running a car or ute.

What you can’t claim

Even if your employer or site manager advised you to wear simple attire to work, you can’t claim costs for it. Many tradies make this mistake, claiming costs for both ordinary clothes (jeans, T-shirts, and the like) and more specialized apparel, like as hi-vis gear.

Many tradespeople get tripped up because they can’t claim travel expenditures between their house and job. This covers side excursions such as dropping off or collecting up the kids from school.

There’s also a distinction between what the ATO considers a “car” and what it considers a “bigger vehicle.” It’s critical to get this right since the sort of car you have affects the benefits you can receive.

What you can claim

If you work as a tradesperson, make sure you know what you may claim on your tax return. Whether you’re an employee tradie or a small business owner, what you may claim varies (sole trader, partnership, company or trust).

If your car falls within the following categories:

  • A ute or panel van weighing one tonne or more
  • Designed to transport nine or more passengers

You can deduct a part of your costs (fuel, oil, insurance, and so on) for items you use exclusively for business.

Save in mind that the ATO says you can’t claim these larger cars using the cents per kilometre technique, so keep all your receipts.

According to the ATO, you can claim your car-related expenditures if you use your own vehicle to complete business obligations like:

  • Carrying heavy items or equipment that your company wants you to use for work (such as an extension ladder or a cello) when there is no secure storage available at work
  • Attending work-related seminars or meetings outside of your regular office, delivering products, or collecting supplies
  • Travelling between two different places of employment is OK, but not when one of them is your house (for example, when you have a second job)
  • Travelling from your regular office to an alternate workplace (that isn’t your typical workplace) and then back to your regular workplace or house
  • Travelling from your regular office or home to a non-traditional workplace, such as a client’s premises
  • Itinerant work is performed.

If you share or rent your automobile through a car-sharing service, you can deduct full program membership costs as well as expenditures such as registration, insurance, servicing, cleaning, depreciation, and gasoline.

It’s also crucial to understand what you can’t claim, as many individuals believe that simply driving to work is a tax-deductible expenditure.

Another common mistake is claiming tax deductions from the ATO without giving documentation, such as transporting equipment that is not required by your company.

It’s not claimable unless you can show your company demands it or there’s no secure location to store your equipment at work.

Anyone claiming expenditures for a working automobile or a car acquired on a novated lease that has previously been paid for by your employer through expenses or salary sacrifice will be targeted by the ATO. To summarize, do not double-dip!

Tools and other equipment

Tradies understand the value of their tools, which range from hand tools to power tools, machines, and beyond. Your tools are your mighty advantage, whether you’re a plumber with a belt full of spanners and screws or a brickie with a cement mixer and trowel. However, tremendous power comes with great responsibility, and working with a variety of tools might raise your tradie safety hazards.

What you can’t claim

The important point to remember is that you cannot claim costs for tools and equipment that you use for personal reasons.

You also cannot make a claim for tools given by your company or another individual.

When it comes to tool expenditures, if the tool costs more than $300 (and you paid for it), you can deduct the cost over several years (taking in depreciation).

If the instrument costs less than $300, though, you can deduct the entire amount up in advance.

What you can claim

Here’s when things start to get interesting.

You can claim costs for the proportion of your tools that you use at home and on the job if you can verify that you use them both.

What exactly does that imply? So, if you use your tools 50% on-site and 50% at home, you may deduct 50% of the cost of those tools. It’s critical that you can demonstrate this to the ATO.

You can also deduct the cost of any tools you require for your project.

Tips for tradies on tool safety

Although each workplace has its own set of dangers and safety concerns, there are a few universal safety guidelines that apply to everyone.

  • Regular inspections: To avoid accidents and injuries, you should inspect your tools on a regular basis. Before initiating repairs, visual examinations might help find apparent problems like broken wires.
  • All hand-held and power tools should be maintained on a regular basis, according to the manufacturer’s instructions.
  • Tradies must always wear appropriate personal protective equipment (PPE), such as safety aprons, earmuffs, and steel toe-capped boots.
  • Examine the environment: Workplace hazards such as weather, lighting, and ventilation will have a direct impact on your safety and the safety of those around you, especially if you’re using heavy tools.
  • Understand your limitations: Above all, the instruments you use should be appropriate for your level of training and physical abilities.

 Record Keeping For Tradie Business Owners

You have the option of keeping records online or on paper. Businesses should preserve electronic records if at all practicable since the ATO is gradually shifting toward electronic reporting for tax and super responsibilities. Once you’ve set up your system, keeping your records online should make certain chores easier and save you time.

There’s no need to preserve paper copies if you keep your records online unless a specific law or rule mandates it.

Paper records can also be stored and maintained electronically. The ATO accepts photographs of business paper records maintained on an electronic storage media as long as the electronic copies are a true and clear replica of the original paper records and fulfil the ATO’s record-keeping criteria. You don’t have to preserve the paper copies once you’ve saved an image of your original paper records.

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To claim a tax deduction, you must be able to demonstrate

  • That you spent the money; that you spent it on what; and that you spent it on what you spent it on.
  • What was the name of the vendor?
  • When did you buy it?
  • This information is rarely included in bank or credit card statements.
  • You must keep records if your work-related deductions exceed $300. A receipt from the products or service provider is normally kept in records.

The receipt must show:

  • Name of supplier
  • Amount of expense
  • Nature of goods or services
  • Date the expense was paid
  • Date of the document

After you file your tax return, you should keep these documents for at least five years.

Keep track of all your actual costs as proof of your claims, as well as how you computed your job travel as a proportion of your total trip. While keeping a logbook is not required, it is the simplest approach to demonstrate how you computed your work-related use of the car. For these cars, the cents per kilometer technique is not applicable.

Whether you’re an employee or a single trader, you won’t be able to file a claim if you don’t keep track of your costs.

Use an app to keep track of receipts and record them as soon as you receive them so you don’t forget.

You’ll have to show that you spent the money, what you spent it on, who your source was, and when you bought it. Maintain your receipts. The ATO will not be able to validate your spending based on bank statements alone.

You must have records to verify your claim if it exceeds $200; otherwise, you will not be allowed to claim. Receipts must include your supplier’s name, the amount of the cost, the type of the products or services, the date the expense happened, and the date the document was created.

You must preserve your records for five years after you file your tax return.

Keep it real!

The Australian Taxation Office is quite skilled at detecting false or exaggerated claims, and they’re becoming better all the time. Powerful tools may monitor you, even your “private” information like bank transactions. Being caught off guard might land you and your finances in hot water, so keep it honest. Only claim products that you paid for and are directly relevant to your employment.

There are plenty of tax management options available to tradie business owners. However, if you are looking to manage your cash flow better to be more confident in the choices you make as a business owner, you should take a deeper look into your budgeting.

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