3rd May, 2024
Is your trade business on track for the end of the financial year (EOFY)?
With transactions, receipts, invoices and tax deductions to sort out, it can be hectic — and you have to keep your business running at the same time.
One common issue that trips up tradies is tax deductions. Claiming business expenses can significantly reduce your tax bill, but many business owners don’t understand what they can and can’t claim.
Here’s what two of MYOB’s bookkeeping experts — Leanne Berry and Jody Sitters — had to say about deductions for trade businesses.
Be sure to claim all the expenses associated with your trusty ute or work truck — warrants and registration, insurance, repairs, leasing costs and loan repayments.
One note: you can only claim a portion of these expenses if you drive your vehicle outside work hours. Keep a log book of journeys for at least 12 weeks to estimate costs accurately.
If you’re driving from worksite to client meeting to home, fuel costs will add up fast. Keep a record of receipts — the MYOB Capture app makes it super simple.
“Take the photo that goes straight in, and you don’t have to think about it again,” Jody says.
One note on fuel: don’t mix personal costs with business costs.
“You can’t claim the iced coffee you buy when filling up your fuel. It’s easy to do but can make data processing harder if you’re buying personal items in the same transaction,” explains Jody.
Tools, equipment and supplies used in your business can be claimed as deductions, so ensure you’re tracking all purchases and keeping receipts.
If you’ve purchased a vehicle or large piece of equipment in the last year, you may be able to claim that cost as an instant asset write-off.
“You can write off big-ticket items that would usually be in the depreciation pool,” Jody explains. “It started as a COVID measure, but the Government decided to keep it going as a small business incentive. It can change your tax outcome.”
Protective clothing worn by you or your team — including footwear, gloves, steel-capped boots, overalls and safety vests — can generally be claimed as a deduction.
Sunglasses, hats and sunblock are all considered protective gear, so don’t forget to include those flash new sunnies.
“Those are a few things that tradies probably don’t think to put down as expenses, but good accountants will make a provision for them,” says Jody.
Do you use a device to create invoices, make client calls or do anything else for your business? You can claim the cost – or a portion of it if the device is also used for non-business activities.
As Leanne explains, calculating business and personal use can be tricky – so working with an advisor is useful.
“A specialist understands all this and can guide and help you,” she says.
If you do paperwork at home, you can claim some of your heating, cooling, lighting, internet and phone costs as deductions.
These are generally based on the hours spent in your home office each week. Again, keeping a record or log of these hours is a good idea.
Insurance premiums are deductible if the insurance is related to your business operations.
For example, income protection, vehicle cover and home insurance (if you have a home office) may be deductible.
Keep a record of insurance payments and talk to your tax advisor for more info.
If you’re part of a union or have memberships of industry organisations, those fees can generally be claimed.
The same goes for training for you or your staff — if you take a work-related course, online or off, you can usually claim the cost.
Not knowing what to claim makes tax time complicated for tradies and other sole traders.
Cutting through those complexities involves two things – accounting software and advice from a tax expert who can clarify deductions and other tricky tax rules.
Or, as Leanne puts it: “Technology + expert = success.”
That’s where MYOB comes in. If you use the platform to track transactions, create invoices, take payments, and keep a record of receipts throughout the year, you’re setting yourself and your accountant or bookkeeper up for less stress at tax time.
“Get the software in place, automate so you’re getting bank statements through to bank feeds in your software solution, and capture receipts electronically,” says Jody.
“You don’t have to go to your accountant with a shoebox full of receipts that takes hours to sort through.”
Collect the right information, get an expert advisor on board, and you’re on your way to a smooth EOFY and a smaller tax bill.
You can also give your tax advisor a login to your MYOB software so they can easily access your account and help give you real-time advice during tax time.
“If tradies have the software and are connected to an advisor, that’s going to make a huge difference,” says Jody.
Ready for EOFY? MYOB could make all the difference.
Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.
MYOB is not a registered entity pursuant to the Tax Agent Services Act 2009 (TASA) and therefore cannot provide taxation advice to clients. If you have a query concerning taxation including filing your BAS return or annual tax statements then you should consult with your accountant or other registered tax adviser.