Common tax deductions and tips for tradies
Trades people, defined as people who work in particular trades that involve manual labour, are affectionately known as tradies here in Australia.
An expense is a cost you outlay in order to perform a job. As a tradie, there are many costs to doing business; things like buying unique tools, clothing and methods of transport. This is why as a tradesperson, you really need to focus on maximising your tax deductions (and return) as otherwise you run the risk of paying for things you need not and technically going backwards.
Here are some of the more popular tax deductions for tradies. Remember, be truthful and keep good records.
You can claim tools that you use to make a living. As a tradie, just about every tool you own helps you make a living so you are in luck. The rule of thumb is that if a tool costs under $300, you can write it off 100% as a tax deduction in that same year. If the tool, or tools, cost more than $300, you have to claim a decline in its value over many years.
The tools should be for work purposes and if they are also for private use, you need to keep a record of the percentage split between time used for personal reasons versus carrying out your trade.
Transport to and from jobs (when carrying tools)
If your trade requires you to transport your tools to and from a site, you can claim the cost of transport. This might mean car expenses and runnings costs (like petrol and servicing) or public transport.
As a tradie you are probably reliant upon your tools and having them with you at all times. This means that nearly all transport is tax deductable assuming your tools are with you at each site visit or job.
Travel expenses (when you are learning something)
If you travel interstate, overseas or anywhere else for the purpose of learning or developing your trade; you may be able to claim a deduction for the costs. You will need to keep adequete receipts and proof that the travel or trip was related to work. If not all of the trip was work, you need to work out the portions that were and only claim accordingly.
If you use your mobile phone to make business calls, receieve business calls and be on standby for acquiring new business; you can deduct your mobile phone contract.
Many trades people have large mobile bills as the mobile phone is their lifeline to the world of jobs. Be sure to separate your private and business calls somehow or run different phones if you need to.
Sunglasses and protective eyewear
If you work outside, sunglasses can be claimed as ‘sun protection’; another form of protective clothing pretty much Your job should contain actual outdoor labour and the glasses should be functional and purchased for the purpose of protection and duty, not fashion and looks. You will need to keep the receipts of your purchase and discuss specifics with your accountant come tax time.
Remember, you need to be exposed to the sun more than a ‘brief’ moment to legitimately claim this expense.
Protective clothing can be clothes or footwear that is used to provide protection from your daily work duties. It is protective in that it helps you stay safe and prevent damage to your body or possessions.
Examples of protective clothing you can claim as an expense:
- Special footwear like steel capped boots, rubber soled shoes, etc
- Fire resistant clothing
- Sun-protection (including sunglasses and goggles)
- Safety vests and fluoro clothing
- Heavy duty items such as trousers and shirts
Occupations that often utilise protective clothing
Here are some example occupations that require protective clothing, though remember this isn’t an exhaustive list:
- Truck driver
- Forklift driver
- Most tradesmen
Many tradies believe ‘fines’ are tax deductable
Let me tell you, regardless of whether you received a fine at a job or not, a fine is never tax deductable. So tell your mates they are wrong.
Insurance specific to your trade
If you have public liability insurance or other forms of protection that benefit your customer or employer, this too is tax deductable as it is an expense carried out in order to perform your job.
Washing your tradie uniform is an expense
If you are forced to wear a uniform, you are able to claim the cost of washing it. Think company shirts and other clothing that has company names on it. Talk with your accountant, though you can do a rough estimate that it costs you $1 per load of washing perhaps, and you do one load a day for 365 days a year.
Union fees and association fees are tax deductable for tradies
If you are a member of a union or perhaps a professional association related to your profession, all of the fees and charges are tax deductable.
Staying organised as a tax effecient tradie
The better your tax records (such as receipts and notes) the less tax you are likely to pay come end of year (for the self employed). If you are contracted by a builder, working on a salary, the more effecient your receipts and tax notes are the greater your tax refund at the end of the year.
Tax deductions are legal. You just need to be organised. Claim what you can, always use an accountant and you will quickly realise just how beneficial working as a tradie really is when it comes to claiming deductions and expenses.
What other tax deductions are you aware of for tradies?
We are interested in building out further common expenses for trades people in this post. Please leave a comment below if you are aware of any particular deductions that are especially relevant to tradies.