If you are a tradesperson in Australia, you know that navigating local tax laws can be a daunting task. Despite the headache, understanding what you can and cannot claim is crucial for maximising your tax return and ensuring compliance with the Australian Taxation Office (ATO) regulations. 

So, whether you are a carpenter, electrician, plumber, or any other tradie, this guide is for you. We’ll demystify tax deductions for tradies, walking you through practical tips on what you can and can’t deduct, how to properly claim deductions and pitfalls you should avoid. 

Overview of tax deductions for tradies

Tax deductions are expenses that you can subtract from your taxable income, reducing how much tax you owe in a financial year. Due to the nature of trades work and the salary ranges, these deductions can add up to a significant amount. 

How much do tradies get paid in Australia?

Tradies in Australia — including carpenters, bricklayers, plumbers, painters, plasterers, and tilers, to name a few — can claim a variety of work-related expenses. Let’s take a look at average tradies’ salaries in contrast to the deductions they can claim. Understanding this will provide context for the importance of tax deductions and the savings these could represent for you.   

Australia has a high demand for skilled tradespeople. An average tradie salary may range from AUD 60,000 to over AUD 130,000 per year; trades such as electricians, plumbers, and construction site managers are among the highest-paying roles in the sector

Here is a table summarising how much tradies get paid in Australia:

What can tradies claim on tax? 

Tradies can generally claim the following types of expenses:

• Tools and equipment
• Vehicle expenses
• Work-related clothing and protective gear
• Travel expenses
• Training and education
• Miscellaneous expenses like phone bills and union fees

Let’s take a closer look at each of these categories. 

Tools and Equipment

As a tradie, you can claim deductions for tools and equipment that are necessary for your work. This includes the cost of purchasing, renting, and maintaining these items. The ATO allows deductions for:

• The full cost of items costing up to $300
• Depreciation for items costing more than $300 over their effective life

Example: John, an electrician, purchases a new set of wire cutters, voltage testers, and pliers for $500 in total. Each item costs less than $300. As such, John can deduct the full $500 as these tools are necessary and exclusively used for his electrical work.

Vehicle Expenses

Vehicle expenses are a significant deduction for many tradies, especially if you travel frequently for work. Eligible vehicle expenses include:

• Fuel
• Maintenance and repairs
• Insurance
• Registration
• Depreciation

If you are a tradesperson, you can claim these expenses when using your vehicle for work. However, it’s crucial to differentiate between work-related and personal use. The ATO requires detailed records, such as a logbook, to substantiate the work-related portion of vehicle use.

Example: Sarah, a plumber, uses her van for work-related travel, spending $2,000 on fuel, $300 on maintenance, and $500 on insurance annually. Sarah can deduct the total $2,800 ($2,000 + $300 + $500) as these expenses are directly related to her business operations.

Clothing and Protective Gear

If your trade requires specialised clothing and protective gear, you can claim the cost as a tax deduction. This includes:

• High-visibility clothing
• Protective boots and gloves
• Safety glasses and helmets

Example: Sevara, a construction worker, spends $150 on steel-toed boots, $100 on a hard hat, and $75 on safety gloves. Sevara can deduct the total $325 ($150 + $100 + $75) since these items are necessary for their safety.

Travel Expenses

In addition to vehicle expenses, you can also claim travel expenses incurred while travelling for work. This includes:

• Accommodation costs
• Meals
• Transportation costs

It’s important to note that commuting between home and work is generally not deductible. However, travel between different work sites or for work-related training and conferences is deductible.

Example: Lisa, a landscaper, travels to a different city for a week-long job, spending $400 on accommodation, $200 on meals, and $100 on transportation. Lisa can deduct the total $700 ($400 + $200 + $100) as these expenses are incurred while travelling for work.

Training and Education

You’ll often need to maintain your knowledge and upskill. This type of work-related training and education is deductible for tradies. This includes:

• Course fees
• Textbooks
• Stationery
• Travel expenses related to attending courses

Note that the training must be directly related to your current job and not for the purpose of obtaining new employment.

Example: Fabio, a carpenter, attends a woodworking seminar to improve his skills, spending $300 on the seminar fee and $150 on travel expenses. Tom can deduct the total $450 ($300 + $150) as the seminar directly relates to his carpentry work.

Other Deductible Expenses

Besides the common expense categories listed above, you can also claim a range of other costs related to your trade. Here are some examples of such deductions: 

• Mobile phone bills
• Internet expenses
• Union fees
• Work-related stationery

Essentially, you can claim most expenses directly related to earning your income as long as they are substantiated with receipts and records. 

Example: Emma, a painter, spends $200 on trade journal subscriptions and $100 on union fees. Emma can deduct the total $300 ($200 + $100) as these expenses are necessary for staying informed and maintaining her professional status. 

If in doubt about whether something qualifies as a tax deduction for tradies or not, reach out to a tax specialist who can provide guidance and help ensure tax compliance. 

What tax deductions can’t be claimed by Tradespeople?

While you can benefit from many tax deductions and reduce your taxable income from trades work, remember that there are several categories of expenses that don’t qualify. Here are some examples. 

Private Expenses

Private expenses are those that are not directly related to earning your income. Examples include:

• Personal grooming
• Non-work-related clothing
• Childcare

These expenses cannot be claimed as tax deductions.

Non-Deductible Travel

Travel expenses that are considered non-deductible include:

• Commuting between home and work
• Travel for personal reasons

Only travel directly related to work can be claimed.

Tips for maximising tax deductions

To maximise your tax deductions, consider the following tips:

Keep detailed records

Proper record-keeping is crucial for all work-related expenses in Australia. While some tax deductions can be claimed without a receipt, most require documentation such as receipts, invoices, and bank statements.  

Detailed records help you substantiate your claims with the ATO, protect you from penalties in case of an ATO audit, and ensure that you don’t miss out on any potential deductions. 

Consult a tax professional

If you are unsure how to file your taxes, consider working with a tax professional. They can provide invaluable assistance in identifying all eligible deductions and ensuring compliance with ATO regulations. Tax professionals offer tailored advice based on your specific trade and circumstances, helping you maximise your tax return while avoiding common pitfalls. 

Stay updated with ATO guidelines

Tax laws and guidelines can change frequently, so it’s important to stay informed about the latest updates. The ATO regularly updates its guidelines and rules regarding what can be claimed as deductions, and failing to comply with these changes can result in denied claims or penalties. Consider subscribing to ATO newsletters or regularly checking their website can help you stay informed. 

Use technology

Leverage technology to help you file taxes properly. For example, the ATO has a dedicated app to track your expenses and store records. There are also many other types of software and apps for record-keeping, accounting, report-generation, and more. Using technology can help you stay organised and easily access your financial information when preparing your taxes. 

FAQ

What receipts should I keep for tax deductions?

Keep receipts for all work-related expenses, including tools, equipment, vehicle expenses, and training costs. These records are essential for substantiating your claims.

Are union fees tax-deductible?

Yes, union fees are tax-deductible if they are directly related to your work as a tradie.

How do I claim vehicle expenses if I use it for both work and personal use?

You need to keep a logbook to record the work-related use of your vehicle. You can then claim the percentage of expenses that correspond to the work-related use.

Final Thoughts

Understanding and claiming the appropriate tax deductions for tradies can significantly reduce your tax burden and increase your savings. 

Make sure to keep detailed records, stay organised, and follow the latest ATO guidelines during the tax season. If in doubt, Lawpath can help you ensure tax compliance through our personalised services for tradies and small businesses.