This is a guest post by Mark Chapman the Director of Tax Communications at H&R Block.
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.
Here are H&R Block’s expert tax tips for tradies.
Claim tools and equipment
You probably use a variety of tools every day and the rule is that if you’ve paid for them and you use them as part of your job or business, you can claim them as a deduction against your tax.
Exactly how you do that depends on whether you run your own business or work for someone else.
If you run your own business, you can claim a deduction straight away for the cost of all tools costing less than $20,000. For most tradies, that means that pretty much all your tools can be written off straight away. But hurry – the special tax break that allows you to do that runs out on 30 June 2017.
If you’re employed by someone else, the rules are less generous. You can claim a deduction straight away for tools costing $300 or less but if the cost is more than $300, you’ll need to write off the cost over the life of the tool, which could be several years. Take care if you purchase a set of tools, you can’t claim each tool individually so unless the cost of the set is less than $300, you’re looking at writing off the cost over a few years.
It’s not just tools you claim either. The same rules apply to items of equipment for the office like computers, phones and printers as well as mobile phones and tablets.
Just remember to only claim the work or business use part of the cost. If you use the tools or equipment for private use, you’ll need to apportion the cost.
Vehicles
You can also 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 use the same $20,000 instant write-off tax break outlined above, provided of course the vehicle costs less than $20,000 (as many second-hand vehicles do). If it costs $20,000 or more, you’ll need to write it off over the life of the vehicle.
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 66c/km allowance for every business km travelled.
Remember, you can’t claim for the costs of traveling from home to work in your vehicle, unless your employer requires you to transport heavy tools which can’t be stored at work.
Two tips for making your taxes easier
1. 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.
2. Consider using a tax agent. Tax is complicated and an agent can ensure you get it right.