Accountants are warning tradies not to leave money on the table this tax season by getting a handle on what they can and can’t claim.
Research from Hnry, Australia’s leading digital accounting service for sole traders, has revealed that subcontractors and self-employed tradies have thrown over $5,500 in unclaimed expenses down the drain every year.
According to the group’s latest Pulse survey, only 64 per cent of sole traders, including plasterers, plumbers, electricians and other contract construction workers claim all of the business expenses they’re entitled to.
Of those that don’t claim, 33 per cent said it was because they are unsure of what they can or can’t claim, and 35 per cent not being bothered with the hassle of financial admin.
What are tradies missing?
Having helped thousands of construction business owners get the most out of their tax returns over the last seven years, Hnry Managing Director Karan Anand told Buid-it that there are ten major claims that most tradies miss.
- Sample material kits: Kits with samples of common materials (e.g. wood, tile, paint) can be claimed if they aid with client decisions during consultations.
- Digital project portfolio: You can claim the production expenses of a digital portfolio that your company uses to showcase projects to clients.
- Mobile charging stations: Tradies can deduct devices that power most major job sites with convenient charging stations.
- Personalised tool engraving: Tradies that engrave tools with their name or business logo to prevent theft can claim the expense.
- Custom branded apparel: Branded apparel like shirts, jackets, hats etc., worn by workers can be claimed as mobile advertising.
- Branded ergonomic safety equipment: Purchases for branded safety gear (hard hats, glasses, vests, knee pads, gloves) can also be claimed as advertising expenses.
- Portable tool organisers: Tool organisers can be claimed if they are used on the job site.
- High-quality construction software: Subscriptions to construction management software can be deducted if your business uses it for project planning, estimating, or client communication.
- Drones for site surveys: The use or hire of drones for progress photos and inspections can also be claimed on tax.
- Quality assurance and advanced measuring tools: Precision tools like laser levels, moisture metres, thermal cameras, and angle finders that are critical to providing clients with top-notch results can be claimed.
Be careful what you claim
With tax time leaving almost 36 per cent of tradies missing out on money in their pocket, Karan said business owners were likely making one of three major mistakes when it came time to lodge their return.
“The first mistake that we often see is claiming the wrong things on your tax return,” he told Build-it.
“This can often be as a result of poor advice that you’ve received from a friend, or from someone who doesn’t work in accounting. It can even be advice from an accountant who might not be across what can be claimed for your specific profession.
“Secondly, not keeping track of receipts, which can make claiming expenses a messy experience. It’s one thing to claim it but if you haven’t got an attributable receipt to back it up, particularly if it’s a large purchase, that can sting.”
“And then the last thing is misclassification. At Hnry, we’re increasingly seeing people with multiple sources of income claiming a lot of different expenses.
“But you’ve got to make sure that the expense relates to the specific streams of income that you’re earning it though. You can’t switch those things around because that will create issues in the system around your claim, which doesn’t make the ATO happy, or the tradies either.”
According to the firm, personal deductions, such as insurance premiums, individual meals, non-specialist workwear, and gym memberships, were by far the most popular false claims. These are never deductible expenses, regardless of the importance of your job.
Health services, like visits to the doctor or physio, were also a standout for tradies as claims for strains still aren’t deductible even if they are caused on the job.
Tax time confusion
Karan also told Build-it that confusion around popular deductibles like ute expenses and materials was leading to tradies overreaching on their tax returns.
When it comes to that brand new triton that doubles as your work pickup and personal off-road explorer, remember you can only claim the percentage of the bill (fuel bill, registration, etc.) that is used for the business.
The same goes for that brand-new ‘work’ iPhone that you scroll TikTok on. Only the percentage of the bill used for business (work calls, admin) can be deducted.
To avoid fudging the numbers, keep a log book handy to track your hours on the job.
For equipment and tools, only essential tradie toys like nail guns and drills will be deductible, unless you can prove they were necessary to undertake certain jobs.
With the EOFY only days away, Karan said it was important tradies still unsure of what to lodge on their tax asked for a helping hand from the professionals.
“It’s an absolute no brainer now to outsource this stuff. If you can’t be on top of it yourself, let an accountant give you a helping hand so you can do what you are good at,” he told Build-it.
“Be it being a sparky, be it a carpenter, be it a plumber, outsourcing allows you to just focus on growing your business knowing your admin is handled.”
