Upgrade Your Toolbox This Tax Time

CLAIMING TOOLS, ASSETS AND OTHER EXPENSES AROUND TAX TIME

Tax time is around the corner and it’s important to know what tools, assets and other expenses of your business you can and cannot claim.

Firstly, what you can claim depends on whether you are an employee tradie or a small business (sole trader, partnership, company or trust).

Employee tradies can claim a deduction for expenses incurred as an employee tradie if:

• you spent the money yourself and were not reimbursed
• it was directly related to earning your income
• you have a record to prove it.

If your expense was for both work and private purposes, you can only claim a deduction for the work-related portion.

Small businesses (sole trader, partnership, company or trust) can claim expenses if:

• the money has been spent for your business and not a private expense
• the purchase is for a mix or business and private use, only the portion that relates to your business can be claimed and you MUST have record to prove this.

What deductions can I claim this tax time?

The type of deduction you claim depends on the cost of the asset.

If the tool or equipment cost you $300 or less, you can claim a deduction for the full amount in the year you buy it, if:

• you use it mainly for work purposes
• it's not part of a set that together cost more than $300.

You can claim a deduction for the cost over the life of the item (that is, decline in value), if the tool or equipment:

• cost more than $300
• is part of a set that together cost more than $300.

You cannot claim a deduction for tools or equipment that your employer or third-party supplies for use.

What is Temporary Full Expensing and why is it important for small business owners.

The temporary full expensing measure allows eligible businesses with an aggregated turnover under $5 billion to immediately deduct the business portion of the cost of eligible depreciating assets.

The assets must be first held and first used or installed ready for use for a taxable business purpose between 7.30pm AEDT on 6 October 2020 and 30 June 2022.

Small business can immediately deduct the business portion of the cost:

• an eligible new or second-hand depreciating asset
• improvements to an existing asset if the improvement costs are incurred between 7:30pm AEDT on 6 October 2020 and 30 June 2022.

If you have a small business pool and choose the simplified depreciation rules, you must deduct the balance of your small business pool under temporary full expensing as the end of your income years between 6 October 2020 and 30 June 2022.

What assets can I claim?

Examples of assets that you may be able to claim as an immediate deduction under temporary full expensing include:

• drills
• electric sanders
• electric saws
• grinders
• tool boxes
• ladders
• nail guns
• work lights
• leaf blowers
• lawn mowers
• high-pressure water cleaners
• concrete mixers
• shelving and storage
• a car or ute
• computers, laptops and tablets.

This information was provided by the Australian Tax Office in May 2022. For more information, please visit ato.gov.au.