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Tradies – be certain about what you can claim

If you're a tradie, be certain about what you can claim on your tax return.


What you can claim depends on whether you're an employee tradie or a small business (sole trader, partnership, company or trust). Read on for more info - or give us a call today - and spend your time on something better.

Buying assets for your small business


If you own a small business, you can immediately deduct the business portion of the cost of eligible new or second-hand depreciating assets purchased for your business from 7.30pm AEDT on 6 October 2020 until 30 June 2022 – see Temporary full expensing.


For assets purchased before this period, you can immediately deduct the business portion of the cost of eligible new or second-hand depreciating asset where it costs less than the relevant threshold amount – see Instant asset write-off.


Recent changes


Temporary full expensing


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 by you at or after 7.30pm AEDT on 6 October 2020, and first used or installed ready for use by you for a business purpose between 7.30pm AEDT on 6 October 2020 and 30 June 2022.


Small businesses can immediately deduct:


>the business portion of the cost of an eligible new or second-hand depreciating asset

>the business portion of the cost of 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, you must deduct the balance of your small business pool at the end of your income years ending between 6 October 2020 and 30 June 2022.


The 'lock out' rules that prevented small business entities from accessing the simplified depreciation regime for five years if they opt out of the regime are suspended until 30 June 2022.Choose from 8 stunning layouts


Instant asset write-off


If temporary full expensing doesn't apply to an asset, you may still be able to apply the existing instant asset write-off.


For each asset first used or installed ready for use between 12 March 2020 and 30 June 2021, and purchased by 31 December 2020, the instant asset write-off threshold amount is $150,000 (up from $30,000). Eligibility extends to businesses with an aggregated turnover of less than $500 million (up from $50 million).


You can claim a deduction for each asset first used or installed ready for use, costing less than the relevant threshold amount. The instant asset write-off eligibility criteria and thresholds have changed over time, so make sure you check the eligibility criteria for your business.


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

  • a car or ute

  • drills

  • electric sanders

  • electric saws

  • grinders

  • leaf blowers

  • lawn mowers

  • nail guns

  • ladders

  • tool boxes

  • work lights

  • high-pressure water cleaners

  • concrete mixers

  • shelving and storage

  • computers, laptops and tablets.

For a small business, this deduction applies to most assets, whether the asset you bought is new or second-hand.

You claim the deduction in the year the asset was first used or installed ready for use.

A car limit applies to passenger vehicles (except a motorcycle or similar vehicle) designed to carry a load less than one tonne and fewer than nine passengers. The car limit is:

  • $57,581 for the 2019–20 income year

  • $59,136 for the 2020–21 income year.

If you purchase a car for your business and the car limit applies, your deduction under temporary full expensing and the instant asset write-off is limited to the business portion of the car limit. For example, if you use your vehicle for 75% business use, the total you can claim for the 2020–21 income year is 75% of $59,136 – which is $44,352.


This information is found on the ATO website - check it out here for more info.


#tradietax #carefulwhatyouclaimfor

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