Running a business as a tradie is so much more than getting the job done. But there are many ways to simplify your business life. Andrew Jeffers presents you six tradie tax tips.
Are you a tradie and are you looking for tips to improve your business? Then this 2 Minute Accountant episode is ideal for you.
How often do you request and keep your receipts? Do you send your invoices as soon as you can? What about employment contracts and insurance? These are just some aspects that can influence your taxes at the end of the year.
In order to make your life a lot easier, I’m going to share with you tradies out there a few must-know tradie tax tips.
Of course, they won’t suddenly improve your business. However, they will surely increase your tax deductions over time. All you need to do is work on the following matters.
1. Keep all your receipts organised
When it comes to receipts, the rule is quite straightforward. If you don’t keep receipts, you cannot get a tax deduction. It is that simple.
This means you should request and keep as many receipts as possible. After all, saving your credit card and bank statements is not enough in terms of taxes.
But how can you manage this task without ending up with a pile of paper every month? Well, there are numerous accounting packages that you can try, such as:
- Xero – This accounting software allows you to take a picture of your receipts. Once you’ve got the digital versions, you can just throw the paper away. You can keep your receipts organised and customised as well.
- Hubdoc – As a document collection and management software, Hubdoc gives you the option to save all your financial documents in one single place. It can also retrieve all your bank statements automatically if you prefer.
- Receipt Bank – Another great option to organise your receipts is through receipt bank. This way you can extract the key data from your receipts and publish it directly into your accounting software.
Final Tip: Keep all your receipts in order to be able to get an accurate tax deduction.
2. Submit your invoices in time to receive payments faster
Do you usually send your invoices as soon as you can? How soon is that?
Delivering your invoices in time generally means you get paid faster. If you take a while to submit your invoices, then you shouldn’t complain when your clients don’t pay straight away.
On the other hand, you do your job right, give your client the invoice, then get your smartphone or your credit card reader, swipe it straight away and it’s all done. Things can be that simple if you have an effective system. In fact, your invoices can take about 5 minutes to be delivered and paid.
Now, you should ask yourself: how will your business improve if your invoice system is not fully automated yet?
Final Tip: The faster you deliver your invoices, the faster you’ll receive your payments.
3. Ensure the safety of your employees
Employee safety is among the most important tradie tax tips out there. Make sure you provide the equipment and safety conditions your employees need to do their jobs.
If for some reason, you think this is not important, then imagine what can happen if you don’t comply with safety regulations. It is a much worse scenario.
There are a lot of things you can do though. If you’re a tradie, you can get your staff’s uniforms from an official Australian website and you will have a tax deduction. In other words, you need to purchase from a registered and appropriate regulatory body to get a deduction for your equipment.
This means if you keep all your receipts, you can also get tax deductions for your safety equipment and uniforms.
But equipment is not everything you need… I have a client whose car got smashed. He’s a plumber. Now, how can you get back to work when your car has been wrecked and you can’t just go get another one the next day?
Therefore, make sure you have adequate insurances for your employees. Check if they’re all up to date on a regular basis. Your business might depend on them.
Final Tip: You need insurance for your business and employees. Insurance might just be your salvation if something goes terribly wrong.
4. Know who you work with: contractor vs. employee
When you’re a tradie, sometimes it’s quite convenient to work with contractors. You don’t have to pay as much and you can terminate the collaboration easily.
But things are not as simple as that. Sometimes, you can end up paying more to a contractor than if you hire an employee.
Let’s say you receive an invoice from a contractor who has worked with you. Just because it has an ABN number, that doesn’t mean you don’t have to hold tax back. There’s more into it.
Now, it is possible that 6 months later, their accountant calls you to ask about the superannuation. You tell them: “I don’t have to pay superannuation because he was a subcontractor. He gave me an invoice.”
Well, you may be wrong. Invoices don’t necessarily make them subcontractors. It also doesn’t mean you don’t have to pay their superannuation or withhold their tax.
Final Tip: Be cautious with your collaborations. Get proper advice before hiring new employees or working with contractors.
5. Take care of your paperwork
Another essential point concerning tradie tax tips is keeping your paperwork in check. You probably know how to reline a pipe or fix a tap without much effort. But what about your paperwork?
Staying compliant and keeping your paperwork altogether might not be an easy task. That’s why you should dedicate some of your time to sort this out.
Alternatively, you should hire an external accountant to do it for you. In this case, you should carefully choose someone trustworthy and with experience in your field.
Did you know that you can lose your business if your paperwork is not done properly and in time?
In fact, you can easily get your name on the Credit Reference Association bad payer’s list just because you’re not good at doing your paperwork.
Moreover, are you up to date with the legislation updates? Laws change regularly and it’s difficult to follow all the new bureaucracy requirements.
Therefore, you shouldn’t risk it. It can affect your business, your family and your ability to borrow in the future.
Final Tip: Make sure that your paperwork is up to date to avoid setbacks later on.
6. Create job descriptions and employment contracts for your employees
Establishing job positions and work responsibilities are essential for the proper functioning of any business. It also helps employees to understand their duties.
That’s not all. Having proper documentation of your entire business makes your life much easier and that’s why this is a crucial point among tradie tax tips.
Documentation helps your staff fully understand their place in the company. Besides, every position needs a clear job description about what must be done and how it should be done.
Also, if you’re working with family or friends, you should create boundaries between work and personal affinity. Get everything documented.
Final Tip: Get your job descriptions well-defined and your employment contracts settled. Then, everything will become easier, including tax deduction.
Are these tradie tax tips familiar to you?
Some of these tips are probably not new to you. In whichever case, we are here to help out tradies to achieve their business objectives.
Find the perfect accountant to take care of your business with Shuriken. We can define the best tradie tax tips for your business in order to make it more efficient and profitable.