If you’re an employee Tradie and you pay tax on a PAYG basis, then it pays to learn what you can claim at tax time if you want to legitimately minimise the tax you have to pay, or maximise your tax refund.
The important thing to remember is in order to claim a deduction for work-related expenses:
- you must have spent the money yourself and weren’t reimbursed
- it must be directly related to earning your income
- you must have a record to prove it
- Include all your income on your tax return, including cash
- Use the ATO app’s myDeductions tool to keep track of your expenses
You can only claim the work‐related part of expenses, which means you can’t claim a deduction for any part of the expense that relates to personal use.
NOTE: The Australia Tax Office has created a downloadable 1-page Tax Deduction Checklist for Tradies you can keep and refer back to anytime.
To grab your Free copy, Click Here To Download The Deduction Checklist For Tradies
Here’s a summary of the type of deductions you can normally claim as long as you have proof of your claim:
You can claim a deduction for the cost of travel while performing your duties. This includes travel between different work locations, including for different employers.
Normal trips between home and work are private in nature and can’t be claimed. This applies even if you:
- live a long way from your usual workplace, or
- have to work outside normal business hours (eg weekend shifts)
In limited circumstances, you may be able to claim the cost of trips between home and work, but only if you:
- don’t have a usual workplace and you travel between home and different workplaces for the same employer at least every few days, or
- carry bulky tools or equipment for work (eg an extension ladder) provided:
– your employer requires you to transport the equipment for work
– the equipment is essential to earning your income
– there is no secure area to store the equipment at the work location – the equipment is bulky – at least 20kg – and difficult to transport
If you claim car expenses, you must:
- keep a logbook of your work trips, or
- be able to show us your claim is reasonable if you use the cents per kilometre method (for claims up to 5,000 km only)
Your vehicle is not considered to be a car if it is a vehicle with a carrying capacity of:
- one tonne or more, such as a ute or panel van
- nine passengers or more, such as a minivan
In these circumstances (e.g. if you use a ute) you can claim the proportion of your vehicle expenses that relate to work – such as fuel, oil, insurance, repairs and servicing, car loan interest, registration and depreciation.
Keep receipts for your actual expenses. You cannot use the cents per kilometre method for these vehicles and must use a logbook to show your work-related use.
If you are required to travel away from home overnight for work, you can claim a deduction for accommodation and meal expenses.
Receiving an allowance from your employer does not automatically entitle you to a deduction. You need to be able to show you were away overnight for work and you spent the money.
You can claim a deduction for:
- the cost of buying, mending and cleaning uniforms that are unique and distinctive to your job (e.g. a uniform your employer requires you to wear)
- protective clothing your employer requires you to wear (e.g. hi-vis vests, steel-capped boots and safety glasses)
You can’t claim a deduction for plain clothing worn at work, even if your employer tells you to wear it or you only wear it for work (e.g. jeans or a plain shirt)
Tools And Equipment Expenses
You can claim a deduction for tools or equipment you are required to buy for your job.
If you also use the tools or equipment for private purposes, you can’t claim a deduction for that use. For example, if you have a tool set that you use for private purposes half the time you can only deduct 50% of the cost.
If the tools or equipment are supplied by your employer or another person, you can’t claim a deduction.
If a tool or item of work equipment you only used for work:
- cost more than $300 – you can claim a deduction for the cost over a number of years
- cost $300 or less – you can claim an immediate deduction for the whole cost
Other Common Deductible Expenses
Other work-related expenses you can claim include:
- protective equipment such as sunscreen, sunhats and sunglasses
- union fees
- phone expenses if you have to make phone calls or send texts for work
Remember, you can only claim the work-related part of the expense
What we’ve covered in this post gives you a general summary of what you can and can’t ordinarily claim, but knowing about these deductions is only relevant for you after the end of the financial year.
Why Should You Do Your Tax Planning Well Before The End Of The Financial Year?
The reason for getting your tax planning done as early as possible is that once June 30 comes around, you can only record what you’ve done during the year, and then complete your tax return based on that.
Everything has been earned, and the money has usually been spent or invested. There’s not a lot you can do in July to legitimately minimise your tax liability for the previous financial year.
That means you need to decide on a strategy as soon as possible, and then implement the tax planning recommendations your advisor gives you before the 30th of June if you want to legitimately maximise your income and minimise the tax you pay.
When you don’t do this planning, you’re missing a great opportunity when you’re having your tax return prepared. That’s why rather than waiting until the end of the financial year, you should see us to book a planning session as soon as possible.
When you do there’s a very good chance you’ll be able to pay less tax, so you can keep more in your pocket for important things like holidays or travel, your hobbies or other things you want to do, or maybe paying down your home loan to give yourself a savings buffer for the future.
But if you leave it too late, there’s nothing your advisor can really do to help. So even if you are not thinking of moving jobs, changing careers, or retiring right now, it’s never too early to sit down with us and make a plan for your future.
Register For A Complementary Assessment Session
Each month we hold a limited number of complementary Assessment Sessions where you can get to know us, and we get to know about you and what you would like to achieve. Then together we can often come up with clever ways we might be able to help you.
Would you like to join us for one of these sessions?
If you’d like to schedule one of these complementary, obligation free one-on-one sessions, even if you’re just curious and you’re not sure what to do right now let me know by using this contact form or give us a call on 1300740066 and we’ll set things up for you.
I’m really looking forward to meeting with you,
James Huy Vuong
P.S. You really owe it to yourself and your family to maximise your legacy while you’re still working, and saving as much tax as possible is one great way to do that.
Give us a call on 1300740066 to book your Assessment Session now, or let us know by using this contact form and we’ll add you to our calendar.
* This post is a general summary only. For more information, go to ato.gov.au/occupations
* You can use the ATO app myDeductions tool to keep track of your expenses and receipts throughout the year.