2021 tax tips for tradies: Boost your return

With the end of the financial year fast approaching, tradies after a new work car, like a Brand-New Mazda BT-50, are reminded to take full advantage of the tax incentives available to them.

Like any business owner, tradies that run their own company can claim a whole range of things on tax. Think protective clothing, work tools, uniforms and even the cost of transporting bulky tools for work.

Here’s a deeper look at what self-employed tradies can claim on tax.

A new work car

Got your sights set on the ute that has it all: Brand-New Mazda BT-50? you can take advantage of the new temporary full expensing scheme, introduced by the Federal Government as part of the 2020-21 Budget.

Not sure what that is? Think of it like an extension of the instant asset write-off, but bigger.

For all new purchases made this year and ready to use by 30 June 2022, business owners can claim a deduction on the business portion of the asset - no matter how much it costs.

It means professional tradesmen who want to drive a premium ute, like a Brand-New Mazda BT-50, can claim the business portion of the cost of their new asset, up to the car cost limit of $59,136. That’s a serious saving.

You can also claim a deduction for the cost of petrol, repairs and servicing and even interest on a motor vehicle loan.

Protective clothes

Tradies can generally claim a deduction for the cost of protective clothing, like hi-vis vests and steel-capped boots, according to the Australian Taxation Office (ATO).

They can also claim:

• Items that assist outdoor business activities, like safety glasses, sunglasses and sunscreen, as well as

• Items that protect you or your employees from a health or injury risk in your work environment.

Tools

While the temporary full expensing measure has come into play, it doesn’t mean the instant asset write-off has gone completely.

The instant asset write-off still exists, but for purchases made after 31 December 2020, the limit on the cost of the items you can purchase is set at $1,000.

However, if you’ve purchased an asset before 31 December 2020, and you intend to use it before 30 June this year, the cost of the asset can be up to $150,000.

The measure you claim under will depend on the cost of the asset you want to claim, and when you purchased it. For smaller assets purchased this year, like nail guns, tool boxes or drills, you could use the instant asset write-off measure.

For more expensive items purchased this year, like concrete mixers, lawn mowers or pressure cleaners, you’re better off using the temporary full expensing measure, which has no limits on the cost.

To be eligible for this measure, your business needs to turnover less than $5 billion. If you want to claim the cost of second-hand assets, your business needs to turnover less than $50 million.

Not sure if you can claim something on tax? Ask yourself these questions

If you’re unsure whether you can claim something on tax, there are few questions you can ask yourself, according to etax.

• Is this directly related to, or required for, my work?

• Do I have the proper receipts, invoices or bank statements to prove I purchased this item?

• Did I pay for this item myself?

• Was this part of an allowance?

• Was I reimbursed by someone else?

Remember to keep records

When you’re running your own business, it can be tough to remember to keep track of all your purchases. However, this is key if you want to claim certain things on tax.

The ATO requires you to keep your records for a minimum of five years.

And, if you’re claiming a deduction for the cost of a depreciating asset used for work, like a new car, you’ll need to keep two things:

• Purchase receipts, and

• A depreciation schedule, or details of how you calculated your claim for decline in value for five years after your final claim.

NB: This information is a guide only. It’s important to seek your own financial advice or engage the services of an accountant before making any financial decisions as individual circumstances may vary.