02 Jul 2020
The start of a new financial year means getting your taxes in order, and we’ve put together a guide specifically for flooring installers to help you navigate the trickiness of tax time and employee entitlements.
What you can claim also depends on whether you're an employee tradie or a small business (sole trader, partnership, company or trust).
TAX DEDUCTIONS – what can you claim?
As a tradie, you often pay for work-related expenses out of your own pocket, and it can seem like a bit of financial minefield as to what you can and can’t claim.
Some of the common tax deductions for tradies include (but are not limited to):
If you are still unsure whether your item is tax deductible there are 3 questions you can ask yourself to help you decide.
For employee tradies:
If you answer “YES” to all three questions, and the item was not purchased using a grant or allowance from anyone, then there’s a good chance that the item is tax deductible.
For small businesses the criteria are slightly different, and the money must have been spent for your business (not a private expense). If it is for a mix of business and private use, only claim the portion that is related to your business. You must also have a record to prove the purchase.BUYING ASSETS
You can claim a deduction for tools or equipment you are required to buy for your job. If you also use the tools or equipment for private purposes, you can’t claim a deduction for the private use and will need to work out what percentage of the use of the tools is work-related and only claim that amount. If the tools or equipment are supplied by your employer or another person, you can’t claim them as a deduction.
According to the ATO, if a tool or item of work equipment you only used for work:
Buying assets for small businesses.
If you are a small business owner and bought assets for your business in the last financial year, you can now immediately write them off under the ‘instant asset write-off’ law, up to certain thresholds.
From 12 March 2020 until 31 December 2020 the instant asset write-off:
You can claim a deduction for each asset first used or installed ready for use, up to the following thresholds:
From 1 January 2021, the instant asset write-off will only be available for small businesses with a turnover of less than $10 million and the threshold will be $1,000.
You may purchase and claim a deduction for multiple assets provided each asset costs less than the relevant threshold.
Examples of assets include:
This deduction applies to most assets, whether the asset you bought is new or second-hand. You claim the deduction in the year the asset was first used or installed ready for use.
Assets you purchased for the relevant threshold amount or more are deducted over time using a small business pool.
As an employee tradie, to claim a tax deduction you must be able to show:
Ideally your receipts will show the:
Receipt keeping is particular important if your work-related deductions are more than $200, and after you’ve lodged your tax return you must keep your records for a minimum of five years.
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 a small business owner, you need to keep records that substantiate your business income and expenses.
Your records must:
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. You can keep your business records electronically or on paper, but keeping electronic records makes some tasks easier, especially if you are using a tax agent to manage your return.
Finally, the start of the financial year is a great time to get your business goals in line for the next 12 months. Here’s a checklist to help you get your foundations set up correctly and set a goal to have these things completed by June 30 2021.
More questions? Head to the ATO website for more information on your employee entitlements at tax time.