Tradies that tell you tax deductions or business expense claims “aren’t worth the effort” are simply missing out on their own hard-earned money. What kind of tradie willingly pays more tax than they need to? It might seem time-consuming or complicated at first, but with a little bit of planning, it becomes rather simple. More than that though, it’s an essential part of running a successful trade business.
A self-employed tradie, contractor, or business owner can claim tax back on their business expenses for any business-related purchase. Claiming for business expenses can significantly lower your tax bill, leaving more money in your pocket.
For those starting a trade business, there can be a lot of admin to wrap your head around. Often tradies just starting out can get overwhelmed by the day-to-day, and so forget about tracking their business expenses. Then when it comes to the end of financial year (EOFY) period, business expense claims slip through the cracks. That’s why it’s important to track your expenses throughout the year. It’s a lot easier than trying to remember everything when you sit down to sort your taxes.
Tip: Use the ATO app myDeductions to track your business expenses.
It may only seem like a few bucks here and there, but it all adds up. If you’re planning on growing your business in the future, having a process in place to maximise your tax benefits is only going to become more and more important.
This article covers what tradies can and can’t claim tax deductions on, and the rules around how you go about it.
- Changes to tax deductions due to COVID-19
- Rules around tax deductions for business expenses
- Vehicle-related tax deductions for tradies
- Travel tax deductions for tradies
- Clothing tax deductions for tradies
- Tools & equipment tax deductions for tradies
- Self-education tax deductions for tradies and apprentices
- Tips for better expense management
- Tax FAQ for tradies
Changes to tax deductions due to COVID-19
COVID-19 had a serious impact on the way tradies approached their work. Lockdowns meant some tradies couldn't work for a time and general restrictions forced others to spend more time in their home office. The ATO has provided extra support for tradies affected by these changes. Check out the links below and make sure you're claiming tax deductions for everything you're eligible for.
- General tax information around COVID-19
- Help for tradies affected by COVID-19
- Working from home during COVID-19
- Instant asset write off for eligible small businesses
Rules around tax deductions for business expenses
To claim tax deductions for business-related expenses, there are a few rules relating to your purchases:
- You must have spent the money yourself and can’t be reimbursed.
- The purchases must directly relate to how you earn your income.
- You must be able to prove it with records and/or receipts.
There are a few business expenses that pop up often for tradies. Almost every tradie will be able to claim some kind of tax deduction for their work vehicle, travel, tools, and work-related equipment.
Vehicle-related tax deductions for tradies
You can claim a tax deduction for the cost of travel while performing your work duties. This includes driving between different work locations, even if it’s for different employers.
If you claim tax deductions for travel in a car, you must:
- keep a logbook of your work trips, or
- be able to show 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 can carry:
- one tonne or more, such as a ute, panel van, or truck.
- nine passengers or more, such as a minivan.
If you have a ute or van, you can claim the portion of your vehicle expenses that relate to the work you do. This includes fuel, oil, insurance, repairs and servicing, car loan interest, registration and depreciation.
Make sure you keep receipts for your actual expenses related to your work vehicle. You cannot use the cents per kilometre method for utes, vans, or trucks. While it is not an ATO requirement to keep a logbook of your travels, it’s probably the easiest way to keep track of work-related vehicle usage.
Driving between home and work counts as private travel and usually can’t be claimed. This applies even if you:
- live far away from your usual workplace, or
- have to work outside normal business hours (e.g. weekend shifts).
There are some limited situations where you are able to claim the cost of trips between home and work, specifically when:
- You regularly work at more than one site each day before returning home.
- You have to carry bulky tools or equipment for work and all of the following points are also true:
- The tools or equipment are essential for your work and you didn’t just carry them for the sake of it.
- The tools or equipment are bulky – meaning they could only be transported in a motor vehicle.
- There is no secure storage for your tools and equipment at work.
Travel tax deductions for tradies
If you have to travel away from home overnight for work, you may be able to claim a tax deduction for meals and accommodation. A meal/accommodation allowance given to you by your employer does not automatically entitle you to the tax deduction. You still need to be able to prove you were staying somewhere overnight due to your work, and also that you spent the money.
Learn more about tax deductions for vehicles and travel on the ATO website.
Clothing tax deductions for tradies
As a tradie, you often have to wear specific clothing for work. Some of this may be tax-deductible. At the rate some tradies go through work gear, it’s worth tracking your expenses for clothing.
You can claim tax deductions for:
- The cost of buying, repairing and cleaning uniforms that are unique to your work (e.g. a uniform you are required by your employer to wear).
- Protective clothing (PPE) your employer requires you to wear (e.g. safety-coloured vests, overalls, protective boots and safety glasses etc).
Note: You can’t claim tax deductions for plain clothing (e.g. jeans and T-shirts). This applies even if you wear it at work or if your employer tells you to wear it.
Laundry and dry cleaning
You can also claim tax back on the costs associated with washing, drying and ironing work clothes, or having them dry-cleaned.
You don't need to provide evidence for your laundry expenses if the total amount is less than $150 and your total work-related expenses are $300 or less.
The ATO allows you to use the following amounts to work out your laundry claim:
- $1 per load (includes washing, drying and ironing) if the load is strictly work-related clothing only.
- 50 cents per load if other laundry items are included.
Tools & equipment tax deductions for tradies
Most tradies know that they can claim a tax deduction for tools and equipment, but it’s surprising how many don’t bother. Keep in mind that this deduction only applies to tools and equipment you need to buy for your job.
If you use the tools for private jobs around your home, for example, you can’t claim tax on this usage. So if you only use your gear for work purposes half the time, then you can only claim 50% of their cost.
Tool & equipment deductions are based on their cost:
- If you paid over $300, you can claim a deduction for the cost over a number of years.
- If you paid $300 or less, you can claim an immediate deduction for the whole cost.
Note: If your tools or equipment are entirely supplied by your employer or another person, you can’t claim tax on them.
Deducting tax on the insurance of tools and equipment
You can also claim a deduction on what you paid to insure your tools and equipment. The same rules apply when purchasing — you can only claim to the extent that you use them for work-related purposes. If you only use your gear for work purposes half the time, you can only claim 50% of the insurance.
Learn more about tax deductions for tools & equipment on the ATO website.
Self-education tax deductions for tradies and apprentices
If your course relates directly to your current job, such as an apprenticeship, you can claim a deduction for self-education expenses. You can also claim a deduction on travel costs to and from your place of education, or from your workplace to your place of education and back. Records must be kept to claim a deduction.
Note: You can’t claim a deduction if your:
- studies aren’t strictly related to your current job. For example, you can’t claim if you’re an apprentice carpenter studying a different trade.
- employer pays, or reimburses you for your course fees.
Tips for better expense management
1. Use a business bank account: Keeping your personal and business expenses separate will make things easier come EOFY-time.
2. Store your receipts digitally: Small expenses often disappear in piles of papers. Rather than holding onto hard copies, use the ATO tool myDeductions to track your business expenses.
3. Track as you go with technology: Get rid of the paper trail and use accounting software with expense management capabilities. Then streamline that process by integrating with Tradify. Easily keep track of your jobs and your expenses while you’re on the go.
Ready to get your business sorted? Try Tradify free for 14-days or book a live walkthrough to see the app in action. Rather have a chat? Give us a ring on 1800 325 674.
Frequently asked questions about tax deductions for tradies
If you’re planning on claiming tax deductions for the costs mentioned above, you may as well check to see if you can claim for other common expenses. Below is a list of frequently asked questions about what tradies can and can’t claim tax deductions for.
Remember, the rule of thumb is that if you use it strictly for work, you can claim. Just don’t try to fool the ATO, it won’t end well.
Can I claim a tax deduction for award transport payments (fares allowance)?
Yes, you can claim a deduction for expenses covered by award transport payments. Of course, this only applies if the expenses are for work-related travel and you have spent the money.
Can I claim a tax deduction for child care?
Unfortunately not. Childcare is a private expense, they have no direct connection to earning your income.
Can I claim a tax deduction for a driver's licence?
Generally no. However, you can claim a tax deduction for special licenses or conditions on your license that relate to your work, such as a heavy vehicle permit.
Can I claim a tax deduction for fines and penalties?
No, you can’t claim a tax deduction for things like speeding tickets and parking fines.
Can I claim a tax deduction for first aid courses?
Yes, you can claim a tax deduction for the cost of first aid training. However, you need to be a designated first aid person and the course needs to be completed in regards to assisting in emergency work situations.
You can't claim a tax deduction if your employer pays for the course, or reimburses you for it.
Can I claim a tax deduction for glasses, contact lenses and anti-glare glasses?
Yes, but you can only claim a tax deduction for the cost of protective glasses. Protective means that you wear them to reduce the real and likely risk of illness or injury while working. They include anti-glare or photochromatic glasses, sunglasses, safety glasses or goggles.
You can only claim a deduction for the work-related use of the eye protection in question.
You can't claim a tax deduction for standard prescription glasses or contact lenses, even if you wear them at work.
Can I claim a tax deduction for home office expenses?
Yes, you can claim a tax deduction for things like electricity, depreciation of equipment or furniture, and phone/internet expenses. You can only claim for the additional costs incurred by working from home. You can’t claim for general household items or food and drink.
Learn more about claiming home office expenses on the ATO website.
Can I claim a tax deduction for licences, permits and cards?
Only for renewals. You can claim a deduction for the additional costs you incur to get or renew these licenses and permits in order to continue your job. You can't claim tax back on the cost of getting your initial licence, regulatory permit, cards or certificates in order to get a job.
Can I claim a tax deduction for meal and snack expenses?
No. These are generally private expenses. However, you can claim a deduction for the cost of a meal when you work overtime if all of the following apply:
- you get the overtime meal under an industrial law, award or agreement.
- the overtime meal allowance is on your income statement as a separate allowance.
- you include the overtime meal allowance as income in your tax return.
Can I claim a tax deduction for newspapers and other new services, magazines and professional publications?
Yes, but only if you can show a direct connection between the content and your work. The content must be specific to your type of work, not general in nature.
Can I claim a tax deduction for parking fees and tolls?
Yes, you can claim a tax deduction for parking fees and tolls on work-related trips between two separate places of work. You can’t claim for parking fees and tolls between your home and work.
Can I claim a tax deduction for phone, data and internet expenses?
Yes, you can claim for work-related use of a mobile phone. If you're not claiming more than $50 total, you do not need to keep records. If you wish to claim more than $50, you need to keep records. This could be an itemised bill where you can identify your work-related calls and data use.
You can’t claim a deduction if your employer pays for your usage, or reimburses you.
Can I claim a tax deduction for protective items?
Yes, you can claim a tax deduction if you wear certain items to protect yourself from the real and likely risk of injury or illness at work. Protective items can include safety glasses, helmets and breathing masks. You can’t claim if your employer provides the equipment or reimburses you for the purchase.
Can I claim a tax deduction for repairs to tools and equipment?
Yes, you can claim a tax deduction for repairs to tools and equipment you use for work. If you also use them for private reasons, you can only claim the percentage you use them for work.
Can I claim a tax deduction for seminars, conferences and training courses?
Yes, you can claim a tax deduction for the cost of seminars, conferences and training courses as long as they directly relate to your work as a tradesperson or apprentice.
You can also claim the cost of travel, accommodation and meals.
Can I claim a tax deduction for sunglasses, sunhats and sunscreen?
Yes, you can claim a tax deduction for these items if you work in the sun for extended periods and need them to protect yourself from the real and likely risk of illness or injury while at work.
Can I claim a tax deduction for union and professional association fees?
Yes, you can claim for union and professional association fees.
This article is not intended to be financial advice. Please refer to the ATO website for official information on the types of expenses that can be claimed. We recommend discussing any specifics with your accounting provider.