Glove boxes and shoeboxes just don’t cut it for keeping receipts for your vehicle, tools etc. Tradies must keep records of all receipts to claim tax deductions.
The onus of proof that any deduction is legitimate is squarely on your shoulders.
There are commercial apps available to keep record of your receipts.
These apps act as an audit tool should you be subjected to an ATO audit.
How does it work?
You take a photo of your receipts and send them on your phone or email to a nominated email address.
Your accountant can access these receipts for the preparation of your tax return.
Motor vehicle claim
Forget what you have heard on ‘the grapevine’. You MUST keep a logbook to calculate the tax-deductable use of your vehicle, regardless of its load capacity and whether the vehicle is owned by you, a company or a trust.
Tax auditors will ask you to prove you business usage. How else can you prove it except with the help of a logbook?
There are two methods that you can use to make a claim for your motor vehicle.
The logbook method
A logbook is an important piece of tax substantiation for people who use their vehicle for work.
If this is the first year you have used the logbook method, you must keep the logbook for at least 12 continuous weeks during the income year.
That 12-week period needs to be representative of your travel throughout the year.
You can then use this representative period to calculate your claim for five years if you take the odometer readings at the start and end of each year that you use it.
There are apps that you can purchase that can make this task easier.
Kilometre method
You can claim up to a maximum of 5,000 business kilometres without written evidence, such as receipts or logbooks, for the financial year.
You don’t need to keep a logbook, but you must be able to show how you worked out your business kilometres (for example, calendar or diary records).
The claim rate is 88 cents per kilometre for the 2024/25 tax year.
If the business vehicle is a car, there’s a limit on the cost you can use to work out your depreciation claim. For the 2024/25 income year, the limit is either $69,674 or the actual cost of the motor vehicle.
Instant asset write-off (IAWO)
From the 2023/24 tax year, the instant tax deduction was restricted to capital items (e.g. cars, tools) new and second-hand which cost less than $20,000. However, you can claim multiple items.
As a temporary measure which has yet to go through parliament, assets valued at $20,000 or more will continue to be placed into the small business simplified depreciation pool and depreciated at 15 per cent in the first income year and 30 per cent each income year after that.
In addition, pool balances under $20,000 at the end of 2024/25 income year can be written off.
Check out Tax for Tradies here for more information