Running a trade business involves a lot of moving parts, from purchasing tools and materials to driving between sites. The good news is that many of your business expenses are tax-deductible — but only if you claim them correctly.
The ATO also has certain focus areas when it comes to trade businesses, so knowing where to be careful can save you money, stress, and time during tax time. Here’s a practical guide for tradies on tools, materials, travel, and other key considerations.
1. Tools and equipment
As a tradie, you likely invest in a range of tools — from hand tools to power equipment.
Key tips:
- Small tools: Items under the ATO’s instant asset write-off threshold can usually be claimed in full in the year of purchase.
- Larger equipment: Tools or machinery above the threshold are depreciated over time.
- Record keeping: Keep receipts and note how the tool is used for business purposes. If it’s partly for personal use, apportion the deduction accordingly.
2. Materials and consumables
Materials you use for jobs — timber, paint, screws, fittings, etc. — are generally fully deductible in the year they are purchased or used.
Key tips:
- Keep receipts or invoices for every purchase.
- Record which project or client the materials were used for if possible.
- Avoid claiming materials for personal projects — the ATO monitors inconsistencies here.
3. Travel and vehicle expenses
You can claim a deduction for travel between jobs or sites if it’s business-related.
Key tips:
- Maintain a logbook or use an app to track business kilometres if you claim car expenses using the logbook method.
- Alternatively, use the cents-per-kilometre method for up to 5,000 business kilometres per vehicle per year.
- Include travel costs such as tolls, parking, and fuel for business purposes.
- Travel to and from home to your main place of work is not deductible, unless your home is your primary base for work or you are required to carry bulky tools and equipment for work.
4. Home office and workspaces
If you do administrative work from home — quoting, invoicing, or scheduling — a portion of home expenses may be deductible.
Key tips:
- Calculate the percentage of your home used for work.
- Claim a portion of utilities, internet, phone, and depreciation on equipment used for business.
- Keep detailed records of hours worked and expenses.
5. Superannuation and employee obligations
If you employ staff, superannuation obligations are a critical compliance area.
Key tips:
- Pay super quarterly and on time.
- Keep payroll records up to date.
- Consider using payroll software to track super contributions and avoid errors.
6. ATO focus areas for tradies
The ATO has identified certain areas as higher risk for trade businesses. Being aware of these can help avoid audits or amendments:
- Cash income vs. bank deposits — report all income accurately.
- Unclaimed or overstated deductions — particularly tools, materials, fuel, and home office claims.
- Subcontractor vs employee payments — misclassification can lead to penalties.
- Vehicle claims — ensure logbooks or kilometre claims are accurate.
Keeping thorough, accurate records in these areas is the best way to reduce risk and maximise legitimate deductions.
7. Practical record-keeping tips for tradies
- Keep receipts, invoices, and proof of payments for all purchases.
- Use a dedicated business bank account and card to separate personal and business transactions.
- Record kilometres, travel dates, and purpose of trips.
- Maintain a register for tools and equipment, noting cost, purchase date, and business use.
- Consider cloud accounting software to simplify BAS lodgement, expense tracking, and tax preparation.
The bottom line
Tax deductions can make a significant difference to a tradie’s bottom line, but only if claimed correctly and supported with accurate records. By keeping good records, knowing ATO focus areas, and understanding what expenses are deductible, you can minimise risk and maximise your return.
Need help getting your tax right?
We can help tradies:
- Identify deductible tools, materials, and travel expenses
- Ensure records are accurate and complete
- Prepare BAS and tax returns correctly
- Reduce the risk of ATO queries or audits
Proper bookkeeping and proactive tax planning mean less stress, more deductions, and peace of mind — let’s make sure your next tax return is spot on.
