Picture this: It’s Friday night at the pub when a mate tells you they’ll be getting a hefty tax deduction because of a new ute or expensive tools. Feeling excited at the thought of a big tax refund, you rush out and buy an expensive vehicle. But when tax time rolls around, you discover that asset write-off laws don’t allow an immediate deduction, or worse, you bought the car in the wrong financial year. Now, you’re out of pocket and have missed out on the tax benefit.
AVOID ‘PUB’ TAX ADVICE
“Tradies are skilled at their craft but often lack expertise with numbers or tax issues,” says Stacey Price, a chartered accountant, registered tax agent and financial coach at Healthy Business Finances. “Many fall into the trap of relying on ‘pub’ tax advice, creating issues for their businesses.”
Price often hears her clients repeat tax tips overheard at the pub or weekend barbecues, such as how to claim big-ticket business items, but without understanding the rules. The original source of the information is often sketchy or unreliable. She stresses the importance of consulting with an accountant before major purchases, particularly leading up to the end of the financial year.
“We read and apply ATO rules and tax legislation to our client’s unique tax situation before giving personalised advice. For accountants to provide you with the best advice, these conversations need to happen throughout the tax year or around April or May, not on July 1 or only once a year. This allows us to determine whether it’s the right time for you to buy an asset, how much to contribute towards super, and implement other tax-reduction strategies. An accountant will also look at your numbers and advise you on what not to do. Waiting until after June 30 is too late. We can still provide guidance, but it’ll apply to the next financial year.”
EMBRACE TECHNOLOGY
Another tax trap for tradies is the reluctance to use technology in their business. “If your glovebox is overflowing with receipts, it’s time to buy simple accounting software,” says Price. Tools like Xero or QuickBooks can help capture and store invoices, reducing EOFY stress and making tax returns easier to prepare.
“Some clients resist paying for software thinking it’s an unnecessary cost. But they end up spending hours creating manual records that can get lost,” Price says. “I’ve had clients lose track of invoices, have overdue payments and lose money months later because they felt embarrassed to ask for the money. With accounting software, they can upload invoices, take payments and issue receipts from their phone or iPad. We’ll see it on our end within seconds— no more faded receipts to decipher months later.”
DIY TAX ERRORS
For those tradies who prepare their own tax returns, Price offers a word of caution. “DIY tax can only take you so far. It depends on your business structure, knowledge of tax laws, and compliance requirements, especially if you employ staff.”
In 2023-24, the Australian Tax Office (ATO) received over 47,000 tip-offs about tax avoidance and dishonest practices, such as undeclared income and under-reporting sales. The building and construction industry ranked among the top three offenders, alongside cafes and restaurants and beauty services.
“I’ve seen business owners mistakenly claim items they’re not eligible for or miss deductions they’re entitled to,” Price notes. “The ATO can audit businesses for up to four years, or even seven years, depending on their structure. If you use an accountant, they’ll handle the audit for you, sparing you the stress.”
CHOOSE THE RIGHT ACCOUNTANT
Business owners often feel confused about the type of professional they need to hire to do their taxes. Price explains this is common in her industry. “If you need to lodge a tax return, hire an accountant with a tax agent license. They are the only ones authorised to give tax advice. Make sure you’re speaking to the right person, so you get the right advice for your tax situation.”
What if the business needs help in setting up the right systems, software and processes? “You don’t necessarily need a tax agent to give that advice, but usually that flows into what your business needs to have in place to make the tax return process easier. Those conversations potentially need to be with a tax agent,” says Price.
Businesses in the same niche may face different tax rules depending on their structure. “For example, a plumber with apprentices operating within a company structure has different obligations than a sole trader with no staff. When you hear tax advice at the pub, are you comparing apples with apples? As a company, you’re answerable to different regulatory bodies. So, before following random tax advice, talk to your tax agent or tax accountant,” says Price.
