Small Business Tradies - How to Maximise Your Tax RefundWhat you may be able to claim on your tax return to maximise your refund.....
Small Business Tradies – How to Maximise your Tax Refund
Are you a tradie and wondering how to maximise your tax refund and what you can claim on your tax return to help this happen? Well, the answer to this depends on whether you are an employee or a business. In this blog, we’re going to look at the Small Business Tradie and how to maximise your tax refund. For employee tradies and tradies who are sub-contractors we have put together a separate blog for you.
As a general rule, Small Business tradies can claim a deduction for expenses incurred if:
• the money was spent for your business (not a private expense)
• you have a record to prove it
Having the right business structure to minimise the tax you pay is also a key component. A sole trader structure may work however other structures such as a partnership, company or a trust may be better for your circumstances. This is a separate topic but one worth exploring by having a chat with us.
Please note that that if your expense was for both work and private purposes, you can only claim a deduction for the work-related portion! For example, you use your mobile phone for both work & personal calls, you will need to work out what percentage of usage is work related and what percentage is personal (this may 70/30 or 50/50 etc).
You will need to keep records that substantiate your business income and expenses. Your records must explain all transactions, be in writing (either electronically or on paper) and be kept for a minimum of 5 years from when you lodge your tax return (some records may need to be kept longer).
Depending on your tax obligations, you may also need to keep records for GST, fuel tax credits and records relating to your employees and contractors.
Bank or credit card statements usually won’t contain all the information required so it is important to keep all receipts from the supplier of the goods or services.
If you’re claiming for the cost of a depreciating asset used for work – such as a laptop – you must keep purchase receipts and a depreciation schedule or details of how you calculated your claim for decline in value, for five years following your final claim. As part of doing your tax return we do a depreciation schedule for you.
Other items that you may be able to claim include:
• protective clothing (for example, hi-vis vests and steel-capped boots) or clothing which has your logo on it
• laundry/cleaning of work related clothes that have the business logo
• work related tablet, computer or mobile phone expenses
• home office expenses
• training courses, licenses and certifications (if directly related to your current role and it has not been reimbursed by your employer)
• union fees
• travel & accommodation expenses when working away from home
• protective equipment such as safety glasses, sunscreen, sunhats and sunglasses where your business activities require outdoor work
• tax agent fees
It is important to note that for small business the instant asset write-off threshold has now increased to $30,000 and has been extended to include the 2020 financial year. This means that any asset you purchase (which costs up to $30,000) can be immediately written off and will not need to be depreciated over a number of years. Some examples of assets may include, but are not limited to:
• motor vehicles
• electric sanders
• electric saws
• leaf blowers
• lawn mowers
• nail guns
• tool boxes
• work lights
• high-pressure water cleaners
• concrete mixers
• computers, laptops and tablets.
You may also be able to claim additional items as operating expenses such as:
• drop sheets
• masking tape
• gaffer tape
• replacement belts for machines
Do you need to transport bulky tools?
In some circumstances, you may be able to claim the cost of trips between home and work. If you claim car expenses, you must either keep a logbook of your work trips or be able to show that your claim is reasonable by using the cents per kilometre method which allows you to claim up to 5,000km per vehicle.
Your vehicle is not considered to be a car if it is a vehicle with a carrying capacity of:
• one tonne or more, such as a ute or panel van
• nine passengers or more, such as a minivan.
In these circumstances (for example, if you use a ute) you can claim the proportion of your vehicle expenses that relate to work. Again, you must keep receipts for your actual expenses. You must also use a log book to show work-related use. You cannot use the cents per kilometre method for these vehicles. Your expenses may include:
• repairs and servicing
• car loan interest
If you’re still confused about what you can claim or have any questions, please give us a call & we’d be happy to help.