End of financial year tax tips for tradies.
It’s that time of year again. We gather our receipts, expenses and invoices and start to prepare our tax returns, or “get the house in order” for someone else to prepare them. Tradies are notoriously disorganised when it comes to paperwork. Many still use an old school carbon receipt book, loads of us don’t keep records of our expenses we incur and glove boxes all over Australia are filled with receipts. So, I spoke to some bookkeepers and an accountant to find out what tradies really need to know this tax time.
Bookkeeping made simpler
Busy Ladies for Tradies specialises in bookkeeping for Australian tradies. Co-founders, Jacqui Day and Lisa Black, tell me Receipt Bank is an app that every tradie should be using. Receipt Bank lets you take a photo of your receipts and it processes them for you. Snap a shot, throw the physical receipt away and you have a record of your expenses in your accounting software. It lets you instantly allocate expenses to particular jobs or employees, or quickly look at what you’ve spent at a particular store over a period of time. You can also use it to find receipts when you need to return materials. No more wiping mud off a receipt that’s been on the floor of your ute for weeks!
Securing your cashflow
One of the biggest issues for small business tradies is cashflow. The Busy Ladies for Tradies team often sees clients get a large payment for a job and think they’re “rolling in it”, forgetting they will have to pay wages, GST, super and tax from it. To avoid cashflow issues they suggest trying to keep debtor days as short as possible, invoicing as soon as you’re able, keeping your expenses as tight as possible, reducing staff overtime and being very clear with your credit terms. Regularly looking at your profit-and-loss statement is a good idea, allowing you to measure growth and make the need for adjustments clear early on.
Don’t pay more tax than you need to
Ezytaxback.com is an online tax return tool that enables an accountant to review your return before it’s submitted to the ATO, providing more assurance. The founder, Justin Mastores, has some valuable advice for tradies.
“If you’re still a ‘shoe box’ tradie, these tips might help you get more organised and make the EOFY less stressful.”
If you carry tools and equipment to and from work because they can’t be left at the worksite due to a lack of storage, you can claim the cost of travel. Parking fees at worksites are a claimable expense, as well as travel costs between all other worksites, but you can’t claim parking fines. If you have to travel for work and stay overnight, you can claim the associated costs such as meals, accommodation, petrol, cabs or public transport as long as they are not being paid by your employer.
Tradies can claim for protective clothing that reduces the risk of injury at work. So sunscreen, hats, safety vests, steel-capped boots, gloves and fire-resistant clothing are all claimable. Clothes with logos are also claimable. You can even claim the cost of washing, drying and ironing, or dry-cleaning these clothes.
According to Justin you can claim tools and laptops and even a desk if you are not reimbursed by your employer. Tools and equipment with a value of $300 and more aren’t claimed as an immediate deduction, but you can claim a deduction for the decline in value of a work-related item over a number of years. But if you are an apprentice and you received government funded tools through your employer, you can’t claim costs or depreciation for those tools.
Finally, Justin reminded me that if you are a member of a union or professional association, your fees and subscriptions are tax deductable. You can claim public liability insurance and income protection insurance.
If you’re still a “shoe box” tradie, these tips might help you get more organised and make the EOFY less stressful.
Mark Menegatti, Bostik Trade Australia ambassador
This story first appeared in issue 25 of the Inside Small Business quarterly magazine.