Tax Deductions You’re Entitled To as a Trades and Services Business Owner

By Team Zeller

27.05.2021 Finances

Tax Deductions You’re Entitled To as a Trades and Services Business Owner

Make your business dollars work harder for you at tax time.

It’s important to understand the deductions and concessions available to you as a trades and services business owner.

When it comes to taxation, not all business owners are schooled in the tools of the trade. With the dust settling on a tumultuous 2020-21 financial year, there have also been key changes to what and how much you can claim, so it’s important to stay on top of tax deductions for trades, as well as the current concessions.

Subscribe to the Zeller newsletter

Fresh updates for your business every fortnight

By sharing your details with us, we may contact you from time to time. We promise we won’t bug you — and you can unsubscribe from communications at any time.

What you can claim

According to the ATO, you can claim the following as work related expenses — on the condition that you haven’t already been reimbursed, the expense is directly related to earning income, and you have proof of purchase.

Tradie tax deductions include:

  • Award transport payments (fares allowance)
  • Car expenses
  • Child care
  • Clothing and uniform expenses (including footwear)
  • Driver's licence
  • Fines and penalties
  • First aid courses
  • Glasses, contact lenses and anti-glare glasses
  • Home office expenses
  • Insurance of tools and equipment
  • Laundry and maintenance
  • Licences, permits and cards
  • Meal and snack expenses
  • Newspapers and other new services, magazines and professional publications
  • Overtime meal expenses
  • Parking fees and tolls
  • Phone, data and internet expenses
  • Protective items
  • Repairs to tools and equipment
  • Self-education and study expenses
  • Seminars, conferences and training courses
  • Sunglasses, sunhats and sunscreen
  • Tools and equipment
  • Travel expenses
  • Union and professional association fees

To understand the specifics of each deduction in more detail, visit the ATO website

What you can’t claim

Put simply, anything purchased for personal use cannot be claimed. This includes travel expenses between home and worksites, and private use of company cars. It’s also important to understand the definition of your vehicle when it comes to claiming deductions. If it’s a one-tonne or more ute or panel van, or a vehicle designed to carry at least nine passengers, you can claim the portion of expenses that you use for work.

Similarly, you can’t claim plain work clothing and associated cleaning expenses, or tools and equipment purchased for private projects. A general rule of thumb to remember is that if it isn’t used for work, it can’t be claimed as a deduction.

Recent changes to concessions

As a result of COVID-19, a number of recent changes were announced by the ATO to support businesses in the preceding financial year. Here is a summary of the new concessions you may be entitled to as a trades and services business owner.

Instant asset write-off

For any assets you purchased by 31 December 2021 and first used or installed from 12 March 2020 and until 30 June 2021, the threshold for instant asset write-off has risen from $30,000 to $150,000 for businesses with an aggregated turnover of less than $500 million (instead of the previous $50 million limit).

Some examples of assets that could be written off include:

  • a car or ute
  • drills
  • electric sanders
  • electric saws
  • grinders
  • leaf blowers
  • lawn mowers
  • nail guns
  • ladders
  • toolboxes
  • work lights
  • high-pressure water cleaners
  • concrete mixers
  • shelving and storage
  • computers, laptops and tablets

Temporary full expensing of depreciating assets

For new depreciating assets first held or installed between 6 October 2020 and 30 June 2022, eligible businesses with an aggregated turnover of less than $5 billion can deduct the business portion of the cost (remember to exclude any proportions relating to personal use). This also applies to second-hand depreciating assets for SMEe with an aggregated turnover of less than $50 million.

Accelerated depreciation

In an effort to back business investment and economic growth, the government is now accelerating depreciation deductions over a 15-month period (12 March 2020 to 30 June 2021) for eligible businesses with an aggregated turnover of less than $500 million. If you’re using the simplified depreciation rules for small business assets that cost more than $150,000 (the new instant asset write-off threshold), you can claim 57.5% of the total cost in the first year it’s added to the small business pool. If you’re using the simplified depreciation rules, you can claim a deduction of 50%.

Lower company tax rate

Compared to a company tax rate of 27.5% in previous years, a new rate of 26% will apply to base rate entities for the 2020-21 financial year, and reduce even further to 25% for 2021-22. Your company is eligible for base rate entity status if it has an aggregated turnover of less than $50 million and 80% or less of your assessable income is passive (so, not gained through interest, dividends, rent, royalties or net capital gain).

Increased small business income tax offset

Compared to 8% in the 2016-17 financial year, the offset has increased to 13% in the 2020-21 period, and will rise again to 16% in 2021-22. Businesses are only eligible if they’re a small business or sole trader, or have a share of net small business income from a partnership or trust.

Expanded access to small business concessions

From 1 July 2020, small businesses (earning an aggregated turnover under the new $50 million threshold) can access an immediate deduction for certain start-up expenses and for prepaid expenditure. In the next financial year, those same small businesses can also access simplified trading stock rules, the PAYG installments concession, a two-year amendment period, and the excise concession.

Preparing to lodge

With all of these changes, it’s important to note that tax agents are getting better and better at spotting fraudulent and inflated claims, so it’s vital you only ever claim legitimate work-related expenses, such as the monthly cost of your Zeller Terminal, which you use to collect on-site, real-time payments. You can’t, however, claim Zeller Account fees or Zeller Mastercard domestic purchase fees – because there are none.

Ready to get started with Zeller?

Now that you’re across all the tax deductions available to you as a trades and services provider, you can maximise your hard-earned business dollars every financial year. Sign up to our Business Blog to cash in on valuable insights all year round.

To fully prepare your business for the end of the financial year, schedule time to speak with your accountant or financial advisor. Please note this article is for educational purposes only and does not constitute advice.