EOFY 2022 tax tips and advice for tradies
Nobody likes completing a tax return but you have to do it, so you might as well get yourself the best possible outcome by claiming everything you’re entitled to. H&R Block Australia director of communications Mark Chapman has written a guide to the top tax tips for tradies.
TOOLS & EQUIPMENT
You can claim a deduction for some or all of the cost of tools and equipment if you acquire it for work purposes. If the item is used for both work and private purposes, you need to apportion the cost. The cost of the asset will affect the type of deduction you can claim:
- you can claim an immediate deduction for items that cost $300 or less and don’t form part of a set
- you can claim a deduction for the decline in value of items that cost over $300 or form part of a set. You can also claim the cost of repairing and insuring tools and equipment if need be.
If you are self-employed, you can immediately write off the cost of any capital purchase (using the “temporary full expensing” measure), including tools and equipment, whatever the value. Sadly, this tax break is restricted to those in business and doesn’t apply to employed tradies.
You can claim the cost of a vehicle, such as a van or a ute, which you use in your business or for your job, provided you paid for the vehicle (so there’s no deduction for work-provided vehicles).
If you run a business, you can claim the same “temporary full expensing” tax break outlined above for all cars costing less than $60,733. If the car costs more than that, depreciation is capped at $60,733.
If the vehicle is a ute with a carrying capacity of one tonne or more, you may be able to write off the entire cost immediately.
If you’re an employee, you can claim depreciation on the vehicle over its life, but only if you keep a logbook of your work/private use. Your logbook can also be used to work out your various other work-related vehicle deductions, such as the cost of fuel, servicing, etc.
Alternatively, if you travel less than 5000kms, you can simply claim a set 72c/km allowance for every business km travelled.
Remember, you can’t claim for the costs of travelling from home to work in your vehicle unless your employer requires you to transport heavy tools which can’t be stored at work.
If your work requires you to wear either a compulsory uniform or protective clothing to keep you safe (or to protect the normal clothing you wear underneath), the chances are you’ll be able to claim a tax deduction both for the cost of purchasing the item and the cost of getting it periodically laundered or dry cleaned.
Look out for the following commonly claimed items by tradies:
- protective clothing and footwear to protect you from the risk of illness or injury, or to prevent damage to your ordinary clothes, caused by your work or work environment. This type of clothing:
- is made to cope with more rigorous conditions, where conventional clothing would be inadequate.
- is designed to protect you – for example, heavy-duty shirts and trousers, distinct from ordinary cotton drill trousers, shorts and short sleeve shirts that you might think are workwear but do not adequately protect you from the risk of injury or illness
- has a density of weave which gives a UV rating sufficient to protect you from the sun where your job requires you to work outdoors.
Amongst the things you could claim are:
- fire-resistant clothing
- safety-coloured vests
- steel-capped boots
- non-slip safety shoes
- heavy-duty shirts and trousers such as rip-proof items of clothing made with heavy-duty mesh that are designed to protect you or items with reflective strips
- Compulsory work uniform branded with the employer’s logo.
- Sun protection costs including sunglasses and sunscreen if you work outdoors
LAUNDRY AND DRY CLEANING
You can claim the costs of washing, drying and ironing eligible work clothes, or having them dry-cleaned.
If the total amount of your laundry expenses are $150 or less and your total work-related expenses are $300 or less, you don’t need to provide written evidence for your laundry expenses. Instead, for washing, drying and ironing you do yourself, the ATO allows you to use the following amounts to work out your laundry claim:
- $1 per load – this includes washing, drying and ironing – if the load is made up only of work-related clothing, and
- 50 cents per load if other laundry items are included.
If you are in an occupation that requires physical contact or proximity with customers or clients during the COVID-19 period, like the building industry, you can claim a deduction for items such as:
- Face masks
- Antibacterial spray.
In relation to COVID-19 tests, the government has announced that it’s making them tax-deductible for Australian individuals when they are purchased for work-related purposes from 1 July 2021.
However, the cost of the tests may already be tax-deductible. Under the existing general deduction provisions, an individual may qualify for a tax deduction for the cost of a COVID-19 test (either PCR or RAT) where they are taken for work-related purposes, eg where there is a mandatory requirement under your employer’s COVID-19 policy.
A COVID-19 test may also be required by certain countries and states in order for an employee to enter that territory or return to their home state. This too is tax-deductible where the test is required for a work-related trip.
RAT kits purchased by individuals for private purposes (eg personal travel, convenience, no access to PCR testing) will not be tax-deductible, either under existing law or under the government’s proposals.
If you incur transport expenses to get to and from the site of a COVID-19 PCR test (or expenses in travelling to the chemist or supermarket to acquire a RAT), these will not be tax-deductible as they are regarded as private expenses, even if the test is a condition of your employment.
PROFESSIONAL ASSOCIATIONS, MAGAZINE SUBSCRIPTIONS & TRADE UNION FEES
As a part of your profession, you may be a member of an association – the good news is, you can claim your subscriptions. If you’re part of a trade union, your fees are also deductible as are magazines subscriptions associated with your line of work (like this one you’re reading).
Two tips for making your taxes easy:
- Keep good records, including invoices and receipts. It makes completing your tax return easier and ensures you can claim for everything you’re entitled to.
- Consider using a tax agent like H&R Block Australia. Tax is complicated and an agent can ensure you get it right, to really maximise your return.