Over the past year, demand for tradies has gone through the roof.
It’s something we’ve seen first-hand at hipages, reflected in record numbers of jobs posted online for everything from renovations to chimney sweeping and experts to tackle mould infestations in the wake of flooding and near-constant downpours across the east coast.
I’ve spoken with countless tradies who have been pedalling so fast that they’ve been struggling to keep pace with the nuts and bolts of running their business. With tax time just around the corner, it’s about to get a lot busier, especially for those who struggle to keep on top of their admin, who will have to switch the tools for a calculator to take on a year’s worth of receipts and invoices.
Knowing that the tax office is keeping a closer eye on work-related expenses for 2022, paperwork isn’t something you want to be rushing or skimping on.
At just 25% in 2022, the company tax rate for small businesses is at its lowest in 50 years. This extra tax relief means tradies might find themselves in a stronger position when reinvesting in and growing their business.
To help out tradies running their businesses, I’ve pulled together six top tips for getting the most out of any EOFY windfalls and working smarter (not harder!) this coming financial year.
1. Stress less at tax time by going digital
Chasing unpaid invoices is a huge source of headaches for many tradies come tax time. However earlier this year, the government announced a raft of subsidies and incentives in the 2022-23 budget to make life more manageable for small businesses.
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One of these incentives was the Technology Investment Boost, designed to make streamlining admin heavy tasks such as quoting, invoicing and job management more accessible by encouraging investment in digital tech and online tools. Under the Technology Investment Boost scheme, for every $100 invested in digital tech by a small business, a $120 tax break will be granted, across everything from accounting to subscription and cloud-based services, portable payment devices and cyber security systems.
2. Upskill and grow your team
By investing in your team, you’re investing in your business.
Another valuable incentive to come out of the 2022-23 budget for tradies is the Skills and Training Boost. Available until June 30, 2024, for every $100 a small business spends on eligible external training courses and upskilling, they will get a $120 tax deduction. If you work in a priority trade, there’s also a revamped wage subsidy scheme in place, meaning your business may also be eligible for up to $15,000 for each apprentice you take on.
3. Review your advertising and marketing expenses
Turning in your tax return is the perfect time to take stock of how much your business spends on marketing and advertising each month. Assess how many leads are coming in, and which channels are delivering results. Ask yourself, are you getting a good return on investment?
Marketing and advertising can be a huge expense for small business owners, and we’ve seen many tradies fall into the trap of investing in pay-per-click online ad services, which can be expensive and time-consuming to set up and implement, with a low ROI to boot.
4. Support your apprentices
Apprentices are essential for long-term industry sustainability. Make sure you are supporting apprentices at tax time by ensuring they are aware of programs and incentives that might make juggling work, life, and expenses much easier while learning on the job.
For example, Trade Support Loans (TSLs) can help to cover more than $20,000 in everyday costs over the life of their apprenticeship. The Living Away from Home Allowance (LAFHA) is also available to eligible apprentices during their first three years of training.
For apprentices with a disability, the government provides additional support through assistance for tutorial, interpreter, and mentor services. Also, if your apprentice received COVID-19 Disaster Payments, make sure they are aware that the ATO has reclassified these as a non-taxable payment, and they may be eligible for a refund on their 2020–21 return.
5. Invest in some new wheels
Thanks to the $150,000 Instant Asset Write-Off, tradies with their own business can buy assets, such as new or second-hand work utes, and immediately claim them as tax deductions. To be eligible, assets need to be first used by June 2023. A major boost for businesses that are in need of new vehicles, under the scheme, tradie businesses can buy a ute worth up to $59,136 before GST.
While businesses that make a loss won’t be able to claim the investment against their taxable income, you may be able to retrospectively claim against pre-COVID profit due to the extension of loss carry-back provisions.
6. Do your research
When it comes to tax time, make sure you know key dates, deadlines, and cut-offs for various claims. If you haven’t already, look into hiring an accountant who specialises in trades and knows the deductions available to your business.
To get the most bang for your buck, ensure that you have a water-tight method in place to keep an accurate record of any business-related expenses. This includes centrally storing any invoices and receipts for meals and accommodation if you’ve travelled away from home overnight for work; purchased protective clothing or PPE including items such as steel-capped boots, sunscreen, and masks; incurred laundry or dry-cleaning expenses; costs involved with running a home office and work vehicles; as well as tools and equipment.
Roby Sharon-Zipser is the CEO and Co-Founder of hipages Group.
Roby Sharon-Zipser is not a tax agent. The tips in this article are for general guidance only and should not be taken as financial product or tax advice. You should consider whether these tips are applicable to your business and obtain advice from an appropriately qualified professional.