Tax deductions for Tradies
- June 30, 2023
- 6 min read
Eligible deductions: What can tradies claim?
Tradespeople, or tradies as we like to call them in Australia can claim various eligible expenses as tax deductions.
Here are some common expenses that tradies can typically claim:
Work-related expenses
Tools and equipment
The cost of purchasing or repairing tools, equipment, and work-related machinery is generally deductible. This includes power tools, hand tools, safety gear, and specialized equipment necessary for trade work.
Vehicle and travel expenses
If a tradie uses their vehicle for work purposes, they can claim deductions for fuel, repairs and maintenance, insurance, registration fees, and depreciation. It’s important to keep a logbook or maintain accurate records to determine the business use percentage.
Travel expenses incurred while travelling for work, such as driving between job sites or visiting suppliers, can be claimed. This includes costs like fuel, tolls, parking fees, and public transportation fares.
Clothing and protective items
Expenses related to purchasing and cleaning work-specific uniforms, protective clothing, safety boots, and other safety equipment necessary for trade work are generally deductible.
Home-based business expenses
If a tradie uses a dedicated space at home for administrative tasks or as a home office, they may be eligible to claim deductions for a portion of home-related expenses such as rent, mortgage interest, utilities, and depreciation.
Work-related phone and internet expenses
If a tradie uses their personal phone or internet for work purposes, they can claim a portion of the expenses. This requires keeping records of work-related usage and calculating the business use percentage.
Trade-related licenses and certifications
Fees paid for trade-related licenses, registrations, and certifications required to perform trade work are eligible for deduction.
Self-education expenses
Costs associated with attending trade-specific training courses, workshops, conferences, or seminars to enhance professional skills and knowledge are generally deductible.
Work-related subscriptions and memberships
Annual fees for trade-related professional memberships, union fees, and subscriptions to industry publications or journals can be claimed.
Insurance premiums
Premiums paid for public liability insurance, tool insurance, income protection insurance, and other trade-specific insurance are generally deductible.
Key deductions for specific trades
We’ve just looked at the general tax deductions you can claim for your trade business. We’re going to take a deeper dive into some of the most popular trades and look at more specific tax deductions each industry can claim.
Scroll down to find your trade –
Plumbers
Plumbers can claim –
- Expenses for purchasing, repairing, and maintaining work-related tools such as wrenches, pipe cutters, soldering equipment, pipe threaders, drain cameras, and plumbing-specific tools.
- Deductions for expenses related to purchasing, cleaning, and repairing work-specific uniforms, safety boots, gloves and knee pads, safety goggles and hearing protection, helmets, disposable suits and high-visibility clothing.
- Fees paid for plumbing trade licenses, registrations, and renewals required to legally perform plumbing work.
- Costs associated with attending plumbing-specific training courses, workshops, conferences, and seminars to enhance professional skills and knowledge.
- Annual fees paid for trade association memberships, subscriptions to plumbing industry publications, and journals.
- Premiums paid for public liability insurance coverage, which protects against potential liability claims arising from work-related accidents or damage.
Electricians
An electrician can claim expenses for –
- Purchasing and repairing work-related tools, including hand tools, power tools, testing equipment, meters, voltage detectors, wire strippers, and cable cutters.
- Purchasing, cleaning, and repairing work-specific uniforms, safety boots, gloves, safety glasses, helmets, and high-visibility clothing.
- Fees paid for electrical trade licenses, registrations, and renewals required to legally perform electrical work.
- Costs associated with attending electrical training courses, workshops, conferences, and seminars to enhance professional skills and knowledge.
- Deductions for annual fees paid for electrical trade association memberships, subscriptions to industry publications, and journals relevant to the electrical trade.
- Premiums paid for public liability insurance coverage, which protects against potential liability claims arising from work-related accidents or damage.
Carpenters
Carpenters can claim –
- Expenses for purchasing and repairing work-related tools, including hand tools, power tools, saws, drills, hammers, levels, measuring and marking tools, planers, routers, vice and clamps, sanders, dust-extraction systems and other carpentry-specific tools.
- Deductions for expenses related to purchasing, cleaning, and repairing work-specific uniforms, safety boots, cut-resistant gloves, safety glasses, respiratory protection, hearing protection, high-visibility clothing, and other protective gear necessary for carpentry work.
- Fees paid for carpentry trade licenses, registrations, and renewals required to legally perform carpentry work.
- Costs associated with attending carpentry-specific training courses, workshops, conferences, and seminars to enhance professional skills and knowledge.
- Deductions for annual fees paid for trade association memberships, subscriptions to carpentry industry publications, and journals.
- Premiums paid for public liability insurance coverage, which protects against potential liability claims arising from work-related accidents or damage.
Painters
Painters can claim as tax deductions –
- Expenses for purchasing, repairing, and maintaining work-related tools and equipment specific to painting, such as paintbrushes, rollers and extension poles, paint trays, sprayers, drop cloths and dust sheets, ladders, scaffolding, caulking guns, paint scrapers and paint mixers.
- Deductions for the cost of paints, primers, thinners, solvents, fillers, sealants, and other consumables directly used in painting projects.
- Expenses related to purchasing, cleaning, and repairing work-specific uniforms, safety boots, gloves, goggles, masks, respirators, and other protective gear necessary for painting tasks.
- Fees paid for painting trade licenses (required if the projectis more than $5000), registrations, and renewals required to legally perform painting work.
- Costs associated with attending painting-specific training courses, workshops, conferences, and seminars to enhance professional skills and knowledge.
- Premiums paid for public liability insurance coverage, which protects against potential liability claims arising from work-related accidents or damage.
Landscapers/gardeners
Landscapers and gardeners can claim –
- Expenses for purchasing, repairing, and maintaining work-related tools and equipment specific to gardening and landscaping, such as shovels, rakes, trimmers, lawnmowers, hedge trimmer, chain saw, pothole digger, leaf blowers, pruners, wheelbarrows, and hoses.
- Deductions for expenses related to purchasing, cleaning, and repairing work-specific uniforms, safety boots, gloves, sun hats, sunglasses, sunscreen, bug spray and other protective gear necessary for gardening and landscaping tasks.
- Deductions for the cost of purchasing plants, flowers, trees, shrubs, seeds, fertilizers, pesticides, mulch, soil, and other gardening supplies directly used in client projects.
- Fees paid for gardening or landscaping trade licenses (requireif the project isis more than $5000), registrations, and renewals required to legally perform gardening and landscaping work.
- Costs associated with attending gardening or landscaping-specific training courses, workshops, conferences, and seminars to enhance professional skills and knowledge.
- Premiums paid for public liability insurance coverage, which protects against potential liability claims arising from work-related accidents or damage.
Builders/construction workers
- Expenses for purchasing, repairing, and maintaining work-related tools and equipment specific to construction, such as hammers, saws, drills, levels, measuring tapes, circular saws, ladders, excavators, concrete mixer, power sander, angle grinders and tile cutters.
- Deductions for expenses related to purchasing, cleaning, and repairing work-specific uniforms, safety steel-capped boots, gloves, safety glasses, ear protection, hard hats, high-visibility vests, and dusk masks and respirators necessary for construction tasks.
- Fees paid for builder’s licenses, construction trade certifications, registrations, and renewals required to legally perform construction work.
- Costs associated with attending construction-specific training courses, workshops, conferences, and seminars to enhance professional skills and knowledge.
- Premiums paid for public liability insurance coverage, which protects against potential liability claims arising from work-related accidents or damage.
· Deductions for payments made to subcontractors for work performed on construction projects, provided that appropriate records and tax obligations are met.
Common mistakes tradies make with tax deductions
Tradies, like any other taxpayers, can make mistakes when it comes to claiming tax deductions.
We asked our Sleek accountants what the common mistakes that tradies should avoid and made this list –
Not keeping adequate records
One of the biggest mistakes is failing to keep accurate and detailed records of expenses. It’s essential to retain receipts, invoices, and other relevant documentation to substantiate the expenses claimed. Without proper records, deductions may be disallowed by the tax authorities.
Mixing personal and business expenses
It’s important to separate personal and business expenses. Claiming personal expenses as business deductions can raise red flags during tax audits. Maintaining separate bank accounts and using dedicated accounting software can help in tracking and categorizing expenses correctly.
Overclaiming for home office expenses
Tradies who claim home office expenses should ensure that they meet the strict requirements set by the tax authorities. Deductions can only be claimed for the specific area used exclusively for business purposes. Overclaiming or claiming for non-deductible items can trigger audits or penalties.
Incorrectly classifying employees as contractors
Misclassifying workers can have significant tax implications. Tradies should ensure they correctly determine the employment status of their workers, distinguishing between employees and contractors. The tax obligations and entitlements differ between the two, and incorrect classification can lead to penalties or legal issues.
Not apportioning expenses correctly
Many tradies use their vehicles and mobile phones for both personal and work purposes. Failing to apportion expenses correctly based on actual business use can result in overclaiming or underreporting income. Keeping accurate records or using a logbook to track business use is crucial to ensure proper apportionment.
Claiming non-deductible expenses
Some expenses may seem relevant to the trade but are not eligible for deductions. Examples include fines, penalties, entertainment expenses, and private travel expenses. It’s essential to understand the specific deductibility rules and limitations outlined by the tax authorities.
Not seeking professional advice
Tradies who are unsure about their tax obligations or deductions should seek professional advice from accountants or tax specialists who have experience in working with tradespeople. They can provide guidance tailored to their specific circumstances and help minimise errors and maximise legitimate deductions.
By now you should have a good idea of the kinds of tax deductions for your trade.
Always seek appropriate guidance from Sleek so you can ensure you claim tax deductions accurately, stay compliant with tax laws, and optimise your tax outcomes.
Let’s schedule a meeting to get on top of your tax deductions!
You might be interested in reading about:
Wrap up & FAQ
No, you cannot claim a deduction for a tool that you no longer use unless you dispose of it and can demonstrate that it is no longer capable of being used or sold.
If you use your vehicle for both work and personal purposes, you can claim a deduction only for the portion of expenses that directly relate to the work-related use of the vehicle.
A tax deduction reduces the taxable income, while a tax credit directly reduces the amount of tax owed.
You should consider hiring a tax agent when you have complex tax situations, limited knowledge of tax laws, or want to ensure accurate and efficient tax compliance.
Don’t fret. If you've made a mistake on your tax return, you should promptly notify the tax authorities, file an amendment or correction, and provide accurate and updated information to rectify the error.
