Ever felt like you were paying to work?
Like there is just no getting ahead without you spending money on the existence of your business? While most of that statement may be true, did you know that your electrician business has probably been paying too much in taxes?
Did you also know that you can save money by paying your taxes on time and manage to get back most of that money through tax deductions for tradies and specific electrician tax deductions?
We also understand that you might simply be too busy to find all this information, so we took the liberty of listing all the possible tax deductions for electricians you can claim, including an easy-to-follow electrician tax deduction checklist. If you're wondering, "What tax deductions can I claim?" or need tips for electricians on managing your finances, we've got you covered.
Electrician Tax Deductions: Travel, Accommodation, and Motor Vehicle
Vehicle Expenses & Mileage
Travel expenses generally refer to trips made for the purpose of work.
Think, driving to and from a residential job then back home (if you’re working from home, that is). that reflect your gas purchases, oil, tires, and repair expenses.
In all honesty, this will require careful and consistent attention on your receipt upkeep. It can be a tedious routine and one you can easily overlook which is why it’s important to have someone who can manage your bookkeeping. They don’t have to be an in-house employee.
You can also claim tax deductions on travel if you have multiple worksites. In this case, you’ll likely travel to different locations to service the electricity of your clients which means you qualify for a deduction.
Car expenses which include parking, tolls, running expenses, and km driven are also deductible. Any trip to your home or visiting relatives won’t be covered for this tax deduction since that is considered by ATO as commuting or private travel.
Home Office Deduction
Most electricians prefer to have a home office. This is cost-effective and gives them a designated location for equipment storage and where to manage all the administrative affairs of the business.
If this is your situation, there are tax deductions available for your rent, mortgages, and even your rates. According to ATO you calculate the amount deductible by measuring the floor area as a proportion of the floor area that is in your home as a whole.
If you’re simply working from home because of other reasons such as a pandemic or for any other convenience you will not be able to claim a home office deduction.
Self-Education
If you enrolled yourself into a course that gained you a certification of skills related to the electrical industry, you have a deduction with your name on it.
This will also apply if you received a bonded scholarship.
According to ATO, your deduction will be allowable if this skill enabled the raise of your salary/wages. There should be signals of improvement in your skill level as well.
The only way to prove this would be to produce a copy of the merit or certification along with receipts of payment for the course. For more information on self-education regulations press here.
Tools & Equipment
You’ll be glad to find out that ATO allows your tax deductions for any tools that you might have purchased in order to help you make an income.
Depending on what the situation is you just might get all of the amount back or just some of it.
Examples of such tools include:
- Hand tools such as grinders, spanners, screwdrivers, pliers, nut drivers, tape measure and so on
- Protective items such as sunglasses, hard hats, sunscreen, and others
- Safety Equipment
- Desks and chairs
You’ll be required to produce proof of purchase so keep receipts and records at hand. Also on the same note, you can claim the cost of repairing or upgrading these tools.
If you use these tools both professionally and privately you’ll be required to calculate amounts so that the deduction is made for the work-related uses.
A tax deduction is meant to make sure you don’t spend all your money building your business and the other half paying off taxes.
By investing in an accountant, even outsourced (in case you’re not planning on employing anyone right now), you save yourself from hours of researching tax advice for electricians that could have been spent building your business and attracting a new pool of clients.
An accountant acts as a tax guide and will help you gather all the requirements for tax season plus making sure you’re compliant. They can guide you through other matters such as job costing, bookkeeping, and yes, financial decisions.
By the time tax season comes around, your accountant would’ve sorted out everything necessary to keep your business on its feet.
Book a consultation with a Tradies Accountant to get started today.