What Tax Tradies Need To Know: Tax Tradies Tips 

The process of filling out a tax return is one that no one particularly enjoys, but since it is required of everyone, you may as well make the most of it by claiming everything to which you are entitled.

If we are being completely truthful, nobody enjoys filing their taxes. It's a real hassle in the you-know-what for the majority of people.

Finding old receipts, organising them, and setting appointments are all things that need to be done, and while your accountant Trevor looks like a nice person, you and he would rather be watching the football together.

Therefore, when the time comes to file your taxes, it is only natural that you will want to get the highest possible return so that the whole process will have been worthwhile.

It is essential to keep in mind that filing your tax return in an honest manner is mandatory; avoid going to extremes in this regard like your avaricious neighbour does. We would all like to deduct the company expenses that we have incurred over the past year as well as the tools that we have in our workshop.

As you navigate the complexities of financial decision-making, a comprehensive financial plan, crafted with the assistance of a seasoned financial advisor, can be your key to financial success.

If you overstate your expenses, however, the Australian Taxation Office (ATO) may send you a letter demanding reimbursement along with a substantial fine.

In addition to this, there is a significant risk that it may cause the tax collector to examine your returns from prior years. This helpful list was developed for the purpose of assisting you in gaining an understanding of what you are legally permitted to claim in order to obtain the highest return possible.

People who work in skilled trades, such as construction workers, plumbers, or electricians, to mention a few, sometimes pay for work-related expenses out of their own personal funds.

And whether you're working long hours or are otherwise preoccupied with meeting deadlines, you don't have a lot of time or energy left over to worry about your taxes.

Because of this, unfortunately, many people who work in trades wind up paying more tax than they should, and they also miss out on hundreds or even thousands of dollars' worth of expenditures that they could have claimed each year.

Find Out Which Technique Gives You A Larger Tax Deduction

Taxpayers in Australia have the option of choosing between two different approaches to claiming automotive expenses: the cents-per-kilometer technique and the logbook method.

In an ideal world, you'll choose with the option that maximises both your tax return and the amount of money you save on taxes. Instead of relying on your instincts while making important choices, you should use a calculator instead.

We are going to break down the distinction.

• Cents per kilometre method
  • This approach uses a predetermined cost for each kilometre travelled. For the 2020 tax year, you will be able to deduct 68 cents per kilometre for automotive expenses related to your place of employment.
  • This claim is restricted to a maximum of 5,000 kilometres driven for commercial purposes per vehicle.
  • There is no requirement that you keep extensive records, but you must be able to provide the ATO with evidence that your mileage was driven for business purposes.
• Logbook method
  • Using this approach, you will be able to deduct a portion of all of your car expenses as a business expense.
  • In order to differentiate between the personal and professional uses of your vehicle, you will have to keep track for a period of twelve weeks in a row.
  • You need to keep a record of the odometer readings, as well as the distance travelled and the purpose of the journey.
  • It is highly recommended that you keep receipts for all of the money you spend on your car throughout the year.

The extensive list of responsibilities that must be fulfilled in order to maintain accurate company mileage records using the logbook approach is the first thing that comes to mind.

On the other hand, there is another aspect of the situation that must not be ignored. It is essential to note that the logbook approach enables you to deduct all of your car's operating expenditures.

To be more specific, it enables you to retrieve the most possible tax refund from the ATO.

Now, as a tradesperson, the chances are rather good that you have to drive for work-related reasons quite frequently. Additionally, you are allowed to claim a greater amount of business-related expenses the more travels you take for that purpose.

Claim your equipment and tools

You undoubtedly use a range of tools on a daily basis. If you bought them and use them for work or company purposes, you can deduct their cost from your taxes.

Whether you are self-employed or work for someone else will determine the specifics of how you go about accomplishing this goal.

If you are the sole proprietor of your own company, you are eligible to take an immediate deduction for the expense of any and all tools that cost less than $20,000 combined. For the vast majority of tradespeople, this implies that virtually all of their tools are immediately eligible for tax write-off.

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Be quick though, because the unique tax benefit that enables you to do that will no longer be available after June 30, 2017.

When you work for someone else, the regulations are stricter than when you work for yourself.

If the cost of the tool is less than $300, you can take the deduction right away; however, if the cost is greater than $300, you will need to write off the expense over the lifespan of the tool, which might be several years. You can take the deduction right away if the tool costs less than $300.

You can't claim each tool separately if you buy a set of tools, so if the value of the set is even less than $300, you're looking at spreading the cost of the purchase out over a few years to deduct it from your taxes. Be careful about this if you decide to buy a set of tools.

You also claim ownership of other things besides tools.

The guidelines that apply to mobile phones and tablets are also applicable to other electronic devices, such as computers, phones, and printers used in the workplace.

Just keep in mind that you can only deduct the portion of the expenditure that relates to your work or your business. If you utilise the tools or equipment for your own personal use, you will be responsible for paying your fair share of the cost.

Vehicles

You are able to make a claim for the cost of a vehicle that you are using in your company or for your employment, such as a van or a ute, as long as you were the one who paid for the vehicle (there is no deduction for cars that were provided by your employer).

If you own and operate a business, you are eligible to take advantage of the $20,000 quick write-off tax break that was described earlier, provided that the vehicle in question costs less than $20,000. (as many second-hand vehicles do). If it costs more than $20,000, you will have to depreciate the amount throughout the course of the vehicle's ownership.

You may be eligible for a tax deduction for your motor vehicle if any of the following apply:

• You are driving from your place of employment to another place of employment (e.g. picking up tools from the tool shop, travelling to another job site etc.)
• You are travelling between various workplaces by car (e.g. to a second job)
• Travel to and from your place of employment if you are required to carry heavy equipment and there is nowhere secure for you to store it there.

You are required to keep a logbook for a period of 12 weeks in a row in order to calculate the percentage of your driving that is related to work. Alternatively, you are mandated to maintain a record of the number of kilometres driven in order to make a claim using the cents-per-kilometer technique.

If you are an employee, you have the option of claiming depreciation on the vehicle throughout the course of its life; but, in order to do so, you are required to keep a logbook of the work and private use of the vehicle.

Your logbook can also be utilised to calculate a variety of additional vehicle-related deductions relating to your place of employment, such as the cost of gasoline, servicing, and so on.

You also have the option of claiming a flat rate of 66 cents per kilometre for every mile driven for company business if your annual mileage is less than 5000 kilometres.

Keep in mind that unless your employer needs you to carry heavy tools that cannot be stored at work, you are not eligible to get reimbursement for the costs of driving from your house to your place of employment in your own vehicle.

In order to file a valid claim, you need to ensure that you comply with the rules established by the ATO and clear up any confusion that you may have.

To begin, the only expenses you can deduct are those that were incurred while using your vehicle for business purposes.

If the title to the vehicle is in the name of another person, the most you may expect from your tax return is reimbursement for any direct costs you paid, such as the cost of petrol.

It is important to be aware of the kinds of costs that qualify for a tax deduction in order to have a complete picture of the amount of money you are eligible to claim. So, without further ado, let us begin.

• You are allowed to deduct expenses, such as the cost of fuel, insurance, servicing, and interest on loans.
• The value of your vehicle will decrease over time, and this is still another expense that you are eligible to claim.
• Because lease payments are included in the total amount that you spend to operate your business, you can deduct those payments from your taxes.

At this stage, it is imperative that you pay close attention to what is going on.

Knowing which trips you may log as business-related is half the battle when it comes to getting your taxes done in a nice and orderly manner. If I may put it another way, if you get this one wrong, you will have to justify to the ATO how your data appear to be questionable.

Remember to always have the following guidelines in the back of your head.

1. The commute from home to the workplace is considered a private journey that cannot be claimed for reimbursement. There are a few notable exception to this rule. Take, as an illustration, the scenario in which you run a business out of your home and then travel for work-related reasons. Or if your company expects you to transport cumbersome equipment to and from the workplace.
2. You are unable to make a claim for travel expenses paid for by your employer if they have already been repaid to you.
3. To avoid incurring penalties from the ATO, make sure your mileage logs are spotless.

Garments Required for the Job

Imagine that in order to keep you safe on the job, your employer compels you to wear either a mandatory uniform or protective clothes (or to protect the normal clothing you wear underneath).

In that situation, there is a good likelihood that you will be able to deduct a tax deduction not just for the cost of buying the item but also for the expense of having it laundered or dry cleaned on a regular basis.

Be on the lookout for the following things, which are frequently claimed by tradespeople:

• Wearing footwear and clothing designed to protect you against the possibility of getting sick or injured, or from having your regular clothes become damaged as a result of the nature of the work you do or the environment in which you do it, is known as protective clothing and footwear. This category of apparel includes:
  • is constructed to withstand more demanding environments, such as those in which ordinary clothes would not suffice.
  • specifically, heavy-duty shirts and pants, as opposed to regular cotton drill trousers, shorts, and short-sleeve shirts, which you might consider to be workwear but which do not guarantee safety you from the risk of getting hurt or illness. This type of clothing is designed to shield you from the hazards of the workplace.
  • possesses a density of weave that results in a UV rating high enough to shield you adequately from the sun in situations where your employment demands you to work outside.

Imagine that you were required to purchase safety gear for your job, such as a hard hat, high visibility clothing, boots, safety glasses, and so on. You are allowed to deduct not only the price of the clothes but also the costs of cleaning it.

You are also allowed to make a claim for the money spent purchasing and laundering uniforms that bear your company's name and emblem.

Among the elements you could argue for are the following:

• apparel that is resistant to fire
• reflective vests of various colours
• boots with a steel toe cap
• gloves
• hardhats
• overalls
• safety footwear with non-slip soles
• rip-proof items of clothing constructed with massive mesh that are made to safeguard you as well as things with reflective stripes are examples of heavy-duty clothing that may be found in heavy-duty shirts and trousers.
• work uniforms are required to be worn, and they must bear the employer's emblem.
• if you work outside, you should budget for sun protection charges such as sunglasses and sunscreen.

Services Include Laundry and Dry Cleaning

You are able to make a claim for the money spent washing, drying, and ironing qualified work clothes, as well as the money spent having such garments dry cleaned.

If the entire amount of your washing expenses does not exceed $150 and the overall sum of your work-related expenses does not exceed $300, you are exempt from the need that you submit documented documentation for your washing expenses.

Instead, you can calculate the cost of your laundry claim based on the following numbers, which the ATO will allow you to use if you do the washing, drying, and ironing yourself:

• $1 per load, which includes washing, drying, and ironing, if the load consists of solely apparel related to work, and $2 per load for all other types of clothing.
• If other laundry products are involved, each load will cost you fifty cents.

Clear The Decks

Write off the cost of any outdated, damaged, or unusable materials that are still on your site at the end of the year in order to qualify for a tax deduction. If you own a business, this applies to you. Write off the value before the end of the year.

In addition, if you have clients who are unable or unwilling to pay and you have tried everything in your power to reclaim the debt without result, you must write off the amount by the 30th of June in order to be eligible for a deduction for bad debt.

Make sure that the write-off is documented in some way, such as a Board Minute or another record of a similar nature.

Track Legislative Amendments

Maintaining your knowledge of any applicable legislative changes requires that you maintain regular contact with your tax agent or the tax authority. Because of this, the tax implications of your business form, be it a sole proprietorship, partnership, company, or trust, will continue to be as favourable as possible.

Create a PAYG withholding account

Keep in mind that you are required to deduct taxes from the payments you make to your employees and maybe some contractors.

You need to register for PAYG withholding, often known as "Pay As You Go," and send the sums that were withheld to the ATO at regular periods.

Delayed Bills

If you haven't been trying to keep up with your business activity statements (BAS) to the ATO, which could result in a larger tax bill than you expected for this fiscal year, you may want to consider delaying the process of invoicing your customers until after you have filed your tax return. This will give you more time to figure out how much you owe in taxes. This will buy you another year to get your financial house in order before you have to start paying taxes on your profits.

Claiming bogus products is now a big risk; only claim actual items

The ATO is very good at identifying fraudulent or "inflated" tax deductions from a great distance. They are already outstanding in this area, and they are only becoming better with time. Powerful new tools are helping to keep tabs on taxpayers, and they may check your "private" details, including the transactions made on your bank account.

It is essential to only claim deductions that are legitimate, such as expenses for things you bought for and that are clearly relevant to your business.

If you are found out claiming products for which you did not pay, which were paid for by your organisation, or which you cannot substantiate with a receipt, the consequences can be painful:

The ATO is going to insist that you pay back what they owe, and they may also scrutinise your tax returns from past years.

Because there are a large number of products that most tradespeople are eligible to claim, there is simply no reason to take chances and end up in trouble. In addition, taxes are what operate our wonderful country, pay for schools and highways and hospitals, so everyone ought to contribute their fair part.

Write Off Bad Debts

If you keep track of your income using the accrual method, which means that you register income when it is invoiced rather than when it is deposited into your account, you will be able to deduct bad debts from your tax return.

Bad debts are debts that can't be collected, such as when a customer owes you money but has not paid you and is not likely to pay you in the near future. When a loan is terrible, it means the following:

• The debtor cannot be located, and you are unable to locate any of their assets; OR
• A debtor who has gone bankrupt or is in the process of liquidation and does not have sufficient funds; OR
• A deceased debtor has left behind assets that are insufficient to cover their obligations; AND
• You have a right to stop pursuing the debt since there is a slim to none possibility that you would be successful in doing so, even though sufficient procedures have been done to try and collect the obligation.

Remember to count that reimbursement as part of your earnings in the same fiscal year that you recouped the loss for that loan, even if it comes to you after you've written it off or otherwise gotten rid of it.

Document Everything

It is simple to lose track of one's financial obligations. Make sure you keep a record of all of the money you spend on things linked to your job so that filing your tax return will be easier and more profitable for you. The following are some pointers that will assist you in developing healthy habits about record-keeping:

• Record all of your business travels in a logbook.
• Because receipts tend to become unreadable over time, it is important to photograph them as soon as you obtain them and save the images in a different folder on your mobile device or computer.
• It is easy to forget about your automatic debits if you pay your bills online and do your banking transactions electronically (paperlessly). Examine your bank statements with great care, and make sure that any applicable automated expenses are included in your deductions.
• Make use of the deductions tool available in the ATO app to record information while you are on the move and then upload it to your tax return (your tax agent can access this too for your convenience)
• In the event that you are selected for an audit or questioned by the ATO, you should keep your records for a period of five years after you have submitted your tax return.

Understanding Tradie Tax Deductions

The Australian Tax Office (ATO) enables tradespeople to make claims for tax deductions on a variety of different things. Certain of these are exclusive to tradespeople; workers in other fields are not permitted to assert eligibility for them.

It is important to keep in mind that work-related expenses are costs incurred on products that are used to create money as a tradesperson. In order to make a deduction claim:

• It must have a direct bearing on how you make your living.
• You must have paid for the item out of your own pocket, without receiving compensation.
• You are required to have a record to demonstrate that you made the purchase (e.g. a receipt)

If you use an item for both work and personal reasons, the only portion of the expense that you can deduct is the portion that is related to work.

For instance, if you use your personal smartphone for work calls and emails fifty percent of the time, you are only allowed to deduct fifty percent of the costs associated with the phone from your income tax return.