Tax Traps That Could Cost You Big This EOFY

Andy
We’ve been there back in the early days of Dr. Drip, and I thought I had it all under control until I copped a tax that we definitely weren’t prepared for, and I had to set up a payment plan to pay it off. 

Ange
Yeah, look, I remember that, and it was super stressful because you cannot miss a payment. It was a lesson learnt the hard way. This is why we’re doing today’s episode. We wanna save you from making the same costly mistakes, especially with the end of the financial year right around the corner. 

Andy
Today we’re diving into the most common tax traps the tradies fall into, and more importantly, how to dodge them so you can keep more of your hard earned cash and not hand it over to the tax man.

Ange
There’s 10 of them, and let me tell you, number 10 is one so many tradies forget to plan for. 

Andy
This is your practical, no nonsense checklist for a smoother tax season. 

You are listening to The Tradie Show. This is the podcast for trade business and contracting bosses like you who wanna lead with confidence, make more profit, and create a better lifestyle.

Ange
We’re your hosts, Andy and Angela Smith, husband & wife team, and co-founders of Lifestyle Tradie. Are you ready to have some fun? 

Andy
Hell yeah! Be honest. How many times this week have you said to yourself, bloody hell, there’s gotta be a better way than this. If you’re flat out but still wondering where the hell your profit’s going, mate, you are not alone. And that’s why we created a stress-free tradie. It’s one day, just one, but it could be the game changer you are looking for. We’re unpacking exactly how the top 5% of tradies run their businesses. The ones making serious money, attracting decent customers, and actually getting proper time off. Plus, you’ll meet a bunch of legends in the same boat as you. Tickets are free. So go grab your spot now at lifestyletradie.com.au/events/ before they’re all snapped up. We look forward to seeing you there. 

Alright, it’s time to kick things off with some Hell yeah wins from our amazing Lifestyle Tradie members. Hell yeah! These are the legends who’ve been smashing in their business, proving that small changes can lead to massive results. And hopefully these give you some inspo on what you can do in your business. So Ange, what do we have this week? 

Ange
We’ve got some great hell yes to share today, Andy. First up, a big shout out to Chris, who’s a plumber in Sydney, and I love that he’s embracing AI into his business. He writes, got an AI agent to take my missed calls and customers are loving it. Now, I know he tried a free AI agent to do this first, but now he’s trying a new one that integrates with his job management system and he is able to book jobs, so that’s super exciting.

Andy
Hell yeah! Yeah, it definitely is. He’s an absolute superstar and it’s great watching people putting more and more AI into the business, which is definitely helping them grow. And just take that little bit of pressure off themselves. What else have we got there, Ange? 

Ange
So next up is Darren who runs a plumbing business in Queensland and he writes 60K improvement in my bottom line compared to last year’s quarter for the same time.

Andy
Hell yeah, that is absolutely amazing. And wow, 60K on your bottom line. That is absolutely huge. Who else have we got?

Ange
So next is Dion, who’s a glazier in SA and he writes, I completed my largest job ever on time and on budget. To say I was stressed about this job was an understatement. 

Andy
Hell yeah buddy. And that is awesome, mate. I know it’s the biggest job you’ve ever done. And what else have we got?

Ange
And a short and sweet Hell yeah from Tony, who’s a large painting company in Sydney who just shouted out that he’s spending a few quality weeks in Japan. 

Andy
Ah, love that. 

Ange
Oh, but plus one of our other members, Paul, who’s a builder in Canberra. He’s just recently taken his entire family to London. 

Andy
There seems to be a bit of a trend here. Isn’t Dave a painter in Melbourne? He’s in London with his family of five at the moment too, right? 

Ange
Yep, sure are. These are the types of awesome holidays you can have when you get your business models set up the right way and not have everything falling apart by the time you get home.

Andy
Hell yeah! And that’s what we’re all about here. Helping tradies like you take control, make more profit and live the life you deserve.

So let’s be real. Tax mistakes aren’t just an absolute pain in the backside, but they can cost you big time as well. 

Ange
We’re talking fines, penalties, and worse, an audit from the ATO that has used sweating bullets and digging through those shoe boxes of receipts that you haven’t looked at in months. 

Andy
And the thing is, most of these mistakes aren’t because people are dodgy. It’s because you are busy, flat out running a business and you simply don’t know what you don’t know.

Ange
So that’s why we’re calling you out. You are not the right person for this job. Trying to be the bookkeeper or the accountant and the tradie all in one is a guaranteed way to stuff it all up.

Andy
You want to get a good bookkeeper who can keep your financial software like XERO or MYOB, up to date, and an accountant who knows their stuff and can help you minimize tax plus plan for the future. 

Ange
Because here’s the truth, most tax mistakes happen because you tried to do it all yourself. You either gave your accountant the wrong numbers or you were late with payments, or you just flat out didn’t know what you were looking at.

Andy
Now, if you’re listening to this in May, this is the most important thing we’ll say today, right now is the time to meet your accountant. 

Ange
Because guess what? Once the calendar flips from the 30th of June to the 1st of July, it’s too late. Whatever you need to do to reduce your tax bill for this financial year, you’ve got about six weeks to make it happen. 

Andy
And your accountant can only give you good advice if your numbers are current. And if everything’s a mess, it’s garbage in, garbage out.

Ange
So the first step is to get your financial platform up to date. And the second step, make an appointment with your accountant now. Don’t wait till the last minute. 

Andy
Your accountant will thank you for turning up with clean numbers and you’ll thank yourself when you’re feeling organized and can have a productive meeting about how you can save money in your business.

Ange
And let’s be honest, tradies are notoriously bad at keeping an eye on their numbers. Most wait until the end of the financial year, or if they’re lucky, they look at it each quarter. But really, you should know where your business stands financially every single week. 

Andy
Spot on. If you are only checking your figures once a year when the accountant asks, you’ve already missed the boat. Good financial habits are just like good site habits. You wouldn’t leave your tools lying around, so don’t leave your finances in a mess either. 

Ange
Exactly. And the good news is avoiding these traps means more money in your pocket, less stress, and way less panic attacks time. 

Andy
You don’t wanna be that tradie who’s losing sleep at night because you’re worried about what you’ve missed or stuffed up. It’s just not worth it. 

Ange
So think of this episode as your heads up. We are giving you the inside scoop on what not to do, so you can finish the financial year strong and start the new one even better. 

Andy
Alright, let’s dive into the biggest tax traps tradies fall into and how to dodge every single one of them.

Ange
Okay. 10 top tips. The first one is misreporting income, and it happens way more than you think. 

Andy
It’s often not even intentional. You flat out you do a few cash jobs here and there. You do a few small jobs on the side and they slip through the cracks. But these days, the ATO is watching, they’ve got more data matching systems than ever before.

Ange
And with AI, they’re getting faster and smarter at catching this stuff. Small businesses are right in the firing line, so make sure you keep meticulous records of all income consistently. 

Andy
Now, number two hurts. So many tradies are missing out on deductions they’ve entitled to. And as a result, they end up paying way more tax than they should.

Ange
Yeah, look, it’s crazy, isn’t it? There’s money sitting right there. But because you haven’t kept track or you don’t know what you can claim, you are basically handing it back to the tax ban. 

Andy
Common ones that catch tradies out are vehicle expenses, tools, safety, gear, and work with, not because they’re forgotten entirely, but because they miss parts of it. Maybe you are claiming fuel, but not maintenance or re-job. Or you’re claiming tools, but forget about the depreciation on bigger purchases. 

Ange
Yeah. And training courses or business subscriptions are another one. If it helps you run or grow your business, then check with your accountant, because I’d say you can claim it, but so many miss these because they don’t think it counts.

Andy
And while we’re talking about deductions, I heard a funny story about a tradie trying to claim a recent European holiday. 

Ange
Oh yeah, this one was gold. 

Andy
A report from H&R Block Australia revealed a tradie tried to claim a full European holiday saying it was full, researching his craft. 

Ange
Oh my god, what an idiot.

Andy
Apparently all he really had to show for it were a few happy snaps. There wasn’t a shred of proper business justification. Safe to say the ATO shut that one down quick smart. 

Ange
Look, there are legit ways to claim travel, but that’s not it. You need to make sure it’s actually connected to your business and you’ve got the proof to back it up properly.

Andy
Exactly. The tax man isn’t silly and they’ve seen it all before. 

Ange
So let’s circle back to depreciation, ’cause that’s a big one too. If you’ve invested in tools or equipment or office gear. Then make sure you are claiming what you can, otherwise you are leaving money behind. The golden rule is this, if it’s genuinely for the business and you’ve got the receipt to prove it, then you’re good. But no proof, no claim. 

Andy
And this is where good habits really do matter. I mean, don’t leave it until tax time to dig through your wallet or inbox and look for receipts. 

Ange
Yeah, you’ve gotta track your expenses as you go. You can use apps like Hubdoc or Dex to take images of your receipts on the go that connect directly to your accounting software. No more saving those paper receipts on the daily. 

Andy
To make it super simple for you, we’ve actually created a free resource. It’s called 81 Tax Deductions for Tradies. You’ll find it linked in the show notes or on our website. Go download it and use it as your checklist. It’s been fully accountant approved, but as always, it’s best to check specifics of your business expenses with a qualified tax specialist.

Ange
Perfect. No excuses now. 

Andy
Now, tax trap number three is a bit of a killer. Mixing up personal and business spending. 

Ange
Oh, this is a common one because when tradies first go out on their own, you generally start out small, right? Perhaps even a sole trader setting up one bank account, one credit card at the time, makes sense. But as you grew and maybe you switched to a company like a Proprietary Limited, you officially became an employee of the business. The relationship is different, but you kept the same banking system. One bank account for business and personal, and one credit card for business and personal.

Andy
And this is where things can become a nightmare. But when you’re a business, you just can’t mix up business and personal things. This keeps the reconciliation of your accounts clean and tidy. 

Ange
This isn’t just about tax time. Keeping things separate gives you a clearer picture of how your business is actually performing week to week. Okay, let’s move to number four, which is about getting your vehicle expenses wrong. Now, this is something we see all the time. You’ve done well. The business is humming, and you decide to treat yourself to maybe that shiny BMW you’ve been eyeing off. And because the business bought it, you think you can claim the whole thing?

Andy
Yeah. This is a classic and a lot of tradies assume that if the business buys the vehicle, everything about it is deductible. Fuel servicing Red Joe the lot. But there are rules and they’re pretty specific about the type of vehicle that you buy as well. 

Ange
Yeah, that’s right. If it’s a proper workhorse, like a Ute or a paddle van or something over one ton carrying capacity, you are generally in better shape. But if it’s a luxury car or if you’re using it to take kids to soccer on the weekend, you are not gonna be able to claim the full amount. 

Andy
And the ATO knows this too. They’ve seen it all before. And if you’re running around in a flash car and claiming it’s for landscaping, you better have a very good reason. Otherwise, it’s just not gonna fly. 

Ange
And let’s not forget about the luxury car tax. If you’ve gone all out on a high end vehicle, that tax can sting and it’s often a shock if your accountant hasn’t warned you. 

Andy
And this is why it’s so important to have a good accountant who actually tells you this stuff up front. So you’re not caught off guard with a big tax bill when you didn’t expect it. 

Ange
Totally. So bottom line, if you wanna maximize your vehicle deductions, then stick to legitimate work vehicles. Keep proper records and always check with your accountant before you buy. 

Andy
Plus, keep an eye on the instant asset write off. With labor staying in power, they’re promised to extend the $20,000 threshold. So if you’re planning on purchasing a work vehicle or equipment, this could be a great window to claim up to 20 grand straight away. 

Ange
Alright. That’s number four done. Andy, what’s next on the list? 

Andy
Tax trap number five is all about missing your super payments or paying them late is a fast track way to get fines and penalties.

Ange
Yeah, ow. The ATO takes this super, super seriously. Pun absolutely intended. If you miss the deadline, you don’t just cop a fine. You also lose the ability to claim it as a tax deduction.

Andy
So you’re getting smashed twice, first by the fine, then by missing the deduction, that would’ve helped you at tax time.

Ange
And let’s be honest, this often comes down to poor cash flow management. So you’ve got wages, supplier bills, and so forth, and superannuation feels like the thing you can delay, but that thinking is gonna cost you. 

Andy
The solution is to treat super just like any other essential payment in your business, set up automated payments, or at the very least, set calendar reminders well before the deadline so you’re not caught scrambling.

Ange
And don’t forget. This isn’t just about your team. If you are paying yourself wages, you need to factor in your own super contributions too. 

Andy
Alright, number five, locked in. Let’s keep this rolling. What’s next? 

Ange
Alright, number six is all about GST. This one can really catch tradies off guard, especially as the business starts to grow. The rule is if your business turns over more than $75,000 a year, you need to be registered for GST here in Australia. The problem is a lot of tradies wait too long to register because they’re not tracking their income properly. 

Andy
And even once they’re registered, they don’t always stay on top of their BAS submissions. You’ve gotta report and pay your GST quarterly or monthly if you choose, but either way, the ATO expects you to be on top of that. 

Ange
And if you are not, you are gonna be hit with penalties and interest, plus the ATO will flag you as a risk, and that’s the last thing you want.

Andy
I think one of the biggest traps is forgetting that GST is not your money. You collect it on behalf of the government, so don’t spend it, set it aside straight away in a separate account. So you’re not scrambling when the bass is due. 

Ange
Absolutely a hot tip. So make sure you’re also claiming back the GST you’ve paid on your business expenses. It works both ways, so don’t leave money on the table.

Andy
And really this comes back to outsourcing this to a professional. 

Ange
Totally, get a good bookkeeper who keeps your financial software up to date and ready to go. That way every quarter when it’s time to report to the ATO for bass or PAYG, your bookkeeper has everything prepped and ready to pass to your accountant.

Andy
Exactly. Quick check logic with the ATO and you are done just like clockwork. Bottom line is get your system sorted, track your sales, track your purchases, and keep that GS team money separate. It’ll save you a world of pain. 

Ange
This is where so many tradies come unstuck. They see money sitting in the bank and think they’ve got extra cash to splash, and next thing you know, they’ve bought a new shiny trailer or a cool piece of equipment, and then the bass bill arrives and it’s, oh no. Where’s that money coming from? 

Andy
Remember. GST is not your money. You are collecting it on behalf of the government. So get it out of your main account straight away. Set up a separate tax account and move that GST across as you go.

Ange
Yep. Think of it as doing your future you, a favor. You’ll thank yourself when the bill arrives and you are not scrambling. Okay, number seven, let’s talk about the place a lot of tradies are doing quoting and admin. I’m talking about the home office. It might feel small, but getting your home office expenses wrong can be a sneaky trap. It’s not just to claim all the power bills on the internet and hope for the best. 

Andy
No, you need to do it properly to claim a portion of your home’s expenses. You’ve gotta show that part of your home is set up. And used mainly for business purposes. 

Ange
That means if you are working from the kitchen bench between making kids lunches, that probably won’t cut it. But if you’ve got a dedicated space, like an office or even a proper admin nook that’s only for business use, you might be able to claim a percentage of your electricity, internet, phone, and even depreciation on your office equipment.

Andy
And remember, don’t go overboard. The ATO knows what’s reasonable for a home office claim. And if you’re claiming half the household expenses for your one little desk, you might attract the wrong kind of attention. 

Ange
And here’s another sneaky one that most tradies don’t think about. If you own your home and you are claiming part of it as a home office, you could be opening the door to capital gains tax when you go to sell. 

Andy
Normally you don’t pay capital gains tax on your family home. But if you’ve been running your business from the property and claiming those expenses, you could be hit with a capital gains tax on a portion of the sale of the house. So what feels like it’s a good tax benefit today? You’ve gotta ask yourself, is it worth it in the long run? 

Ange
Yeah, look. That’s where a savvy accountant earns their keep. They’ll help you weigh it all up and make the smart choice for your situation. 

Andy
Yeah, you wanna claim what you’re entitled to, no more, no less, and you want to keep it clean.

Ange
Alright, what have we got for number eight?

Andy
Poor record keeping Ange. This is a shocker. 

Ange
This is one of the biggest reasons tradies get themselves in a mess. You think you’ll remember later, but trust us, you won’t. 

Andy
Receipts fade, invoices get lost. Or let’s be honest, they’re scrunched up in a ball in the footwell of the passenger side of your vehicle only to potentially fall out anytime the door opens. And when you’re flat out on the tools, the last thing you want is to spend your weekend hunting for paperwork or emails.

Ange
Look, the ATO expects you to keep records for at least five years, and that includes invoices, receipts, bank statements, mileage, logs, the lot. 

Andy
And you should be using digital tools for this. There are heaps of apps now that let you snap photos of your receipts on the go, and they’ll store it safely so you’re not relying on bits of paper anymore.

Ange
And your job management system should help here too. Get into the habit of uploading your supplier invoices and receipts as part of your day-to-day process.

Andy
The goal here is simple. If the ATO came knocking tomorrow, could you show them clean, clear records without breaking into a sweat?

Ange
If the answer’s no, it’s time to tighten it up. Okay, crew. That’s number eight. Let’s move on to number nine, which is not consulting a professional when needed. 

Andy
Too many tradies try and go it alone when it comes to their tax thinking, they’re saving money, but the truth is you are probably leaving thousands on the table. 

Ange
Absolutely. Unless you’ve studied tax law in your spare time, there’s a fair chance you are missing deductions, you are misreporting, or you’re not structuring things properly. And the worst part is you won’t even realize it. 

Andy
And let’s not forget, tax rules change all the time. What you did last year may not be what works this year. And that’s where having a good accountant, one who understands trade businesses and tax law for your country, is worth its weight in gold.

Ange
Absolutely. It’s an investment, not an expense. A good accountant will help you set up your systems. They’re gonna keep you compliant, and most importantly, help you pay the least amount of tax legally where possible. 

Andy
But most importantly, they will strategize about the future, help work out how to hit financial goals, and make those big financial decisions that you’ve faced often in business.

Ange
And don’t wait until tax time to speak to them. Get in touch throughout the year, especially before making big purchases, all business decisions.

Andy
And don’t forget, being a part of a community of tradies like Lifestyle Tradie gives you a huge advantage. You are plugging into this incredible brain of information, seeing exactly what other successful tradies are doing and learning from their wins and mistakes.

Ange
Exactly. You’re not flying solo. You’ve got real time advice and proven strategies at your fingertips. Honestly, that kind of connection is priceless. Okay, number nine, done. And we are nearly there. What’s our final tax trap? 

Andy
And here’s a big one we don’t want to gloss over, and that is company tax. A lot of trades forget about this one completely. 

Ange
Yes. So as a business owner, it’s not just about making money, right? It’s about making profit and company taxes paid on the profit you keep.

Andy
And here’s where a bite. You work hard, you make good money, and then boom, you realize you’ve gotta pay tax on that profit as well, and it’s around 30% in Australia. 

Ange
And too often accountants just assume that you already know this stuff, but most tradies don’t. That’s why it’s so important to have a smart accountant in your corner helping you plan ahead. 

Andy
And the same goes for payroll tax. As you grow and your wages bills get bigger and bigger, you can tip over the threshold and have to start paying payroll tax too. 

Ange
Yes, that’s right. And it’s different in every state, so you actually need to check. So for example, in New South Wales, if your wages hit 1.2 million a year, you actually pay an additional 5.45% on anything above that value. 

Andy
Oh, maybe we should all just move to Las Vegas baby, no payroll tax over there. 

Ange
Wouldn’t that be nice? So, hey, bottom line, these taxes can sneak up on you. Work with your accountant to plan ahead and even set up a separate account where you stash a portion of your profit to cover company tax.

Andy
It’s about staying in control, not getting caught off guard. And remember paying taxes is actually a privilege. It means your business is doing well.

It’s tradie dilemma time, and this is our q and a segment where you let us know what you are having trouble with in your business, and we give you our best advice.

Ange
Today we have a question from Brad who’s an aircon technician with a team of three in Queensland, and he writes, Hey, Andy and Ange. I’m struggling to get my team to follow up on upsells during installations. We do great work, but I know we’re leaving money on the table by not offering add-ons like air purifiers or smart controls. How do I encourage the guys to upsell without them feeling like pushy salespeople? 

Andy
Yeah. I think the thing is in life these days that if you don’t dangle a carrot in front of your employees, they’re not gonna step up and do all these little extra things that you want. You want them to sell extra, you need to give them some type of reward for selling extra as well. And then you need to hold them accountable and you need to sit down every day or at the end of the week. And you’ve gotta have a tally of who is getting the upsells and who aren’t. And what you’re actually doing now is you are encouraging everyone to upsell. And you’re making it into a game. And guess what? When it’s a game, you have winners that are upselling and you have losers that aren’t upselling. And soon before you know it, everyone will be thriving. And they all want to be that number one seller. 

Ange
So I liken this to McDonald’s. We’ve got these 15-year-old pimpled face kids that their single sentence at the counter is, would you like fries with that? All that’s done is empowered me as your customer to make a decision on whether I say yes or no, and we’re doing the exact same thing when it comes to trade. All we’re asking our team to do is to inform your customer about the options of what they could be getting done inside their house and why it’s a benefit to them. All you’re doing then is empowering them to make a decision. This isn’t about being a pushy salesperson. This is about providing options for your customer ’cause it’s truthfully gonna help them. And when your team understands the theory and the strategy behind that, then maybe they too will take ownership of the McDonald’s theory of would you like fries with that? 

Thanks for writing in Brad and sharing your dilemma. Remember, if you have a question or dilemma in your business. Then reach out to us and let us know what we can help you with. 

Andy
Subscribe to The Tradie Show, wherever you get your favorite podcasts. Rate and write us a review or for more information about Lifestyle Tradie, head to lifestyletradie.com.au.