Tax time is when tradies find out whether they kept their receipts. The deductions themselves aren’t complicated. The ATO publishes clear guidance for tradies, and the same three rules apply to almost everything. Where people go wrong is claiming private spending, claiming without records, or mixing up the rules for employees and sole traders.
This guide sets out what the ATO says tradies can and can’t claim, based on the ATO’s tradie guidance and its instant asset write-off pages, checked in October 2026. It covers both sole traders running a business and employee tradies, because the rules differ. It’s general information, not tax advice. A registered tax agent can tell you how it applies to you.
If you’re just setting up, start with our sole trader setup guide.
The three rules for every claim
For employees, the ATO says you can claim an expense if:
- you spent the money yourself and weren’t reimbursed
- it was directly related to earning your income
- you have a record to prove it, usually a receipt
For a business, the ATO’s test is similar: the money must be spent for your business, not privately; if it’s for mixed business and private use, you claim only the business portion; and you must have a record.
If something is used for both work and private purposes, such as your phone, you can only claim the work portion. You can’t claim the same expense twice.
Sole traders: common business deductions
The ATO lists operating expenses tradies running a business may claim, including:
- computer consumables such as printer ink
- drop sheets, masking, gaffer and duct tape
- oil and replacement belts for machines
- insurance, such as public liability, professional indemnity and personal accident and illness insurance
- protective clothing and safety equipment for you and your employees
- licences, permits and cards relating to your business
- phone and internet, for the business portion
For insurance, the ATO separately says income protection premiums paid outside super are generally deductible, while life, trauma and TPD premiums are not. Our tradie insurance guide explains the different types of cover.
The same costs need to be covered by your prices. Our hourly rate calculator turns a year of business costs, your wage and super into the hourly rate you’d need to charge.
Tools and equipment: the instant asset write-off
This is the big one for tradies. The ATO says that from 1 July 2026, the $20,000 instant asset write-off is permanent for small businesses with an aggregated turnover of less than $10 million that use the simplified depreciation rules.
- Eligible assets costing less than $20,000 can be deducted in full in the year they’re first used or installed ready for use.
- The limit applies per asset, so you can write off several assets in one year.
- It applies to new and second-hand assets.
- You deduct only the business portion of the cost.
- Assets costing $20,000 or more go into the small business pool, depreciated at 15% in the first year and 30% each year after.
The ATO’s examples of assets that may qualify include a car or ute, computers and tablets, concrete mixers, drills, sanders, saws, grinders, pressure cleaners, ladders, nail guns, shelving, toolboxes and work lights.
Utes and vehicles
The ATO says a vehicle with a carrying capacity of one tonne or more, such as many utes and panel vans, or one that carries nine or more passengers, isn’t treated as a car for tax purposes. For these vehicles you claim actual expenses for the business portion, such as fuel, servicing, repairs, registration, insurance, loan interest and depreciation. The cents per kilometre method doesn’t apply. A logbook isn’t required for these vehicles, but the ATO says it’s the easiest way to show your business use percentage.
For passenger vehicles under one tonne, a car limit caps the cost you can use for depreciation, including the instant asset write-off. The ATO lists it as $69,883 for 2026 to 27 (it was $69,674 for 2025 to 26). Our ute vs van guide explains how the 1 tonne test and FBT play out for each.
Check your ute’s carrying capacity in the owner’s manual or compliance details rather than assuming every ute carries one tonne.
Protective gear and clothing
The ATO lists, for both employees and businesses:
- protective clothing and footwear, such as hi-vis vests and steel-capped boots
- safety glasses, safety helmets and earmuffs
- sunscreen, sunhats and sunglasses where you’re required to work outdoors
Ordinary clothes, such as jeans or plain shirts, aren’t deductible even if you only wear them at work. Our guides to work boots and hi-vis cover what the safety ratings mean.
Employee tradies: different rules
If you’re an employee rather than running your own business, the ATO’s rules for tools differ:
- tools used only for work costing $300 or less can be claimed immediately
- tools costing more than $300 are claimed over several years as depreciation
- a set costing more than $300 in total is depreciated as a set, even if each item costs less
- tools supplied by your employer, or costs that were reimbursed, can’t be claimed
Employees can generally claim car expenses for trips between home and work only when carrying bulky tools that are essential for the job, with no secure storage at the workplace. Licences, permits and cards (but not a normal driver’s licence) and self-education directly related to your current work may also be claimable.
What you generally can’t claim
- private expenses, such as everyday clothes, lunches and personal phone use
- normal travel between home and your regular workplace (with limited exceptions)
- costs your employer or a client reimbursed
- anything you can’t support with a record
- a private driver’s licence
Record keeping
The ATO says a receipt or other written evidence should show the amount, the date of the document, the date paid, the supplier’s name and what was bought. Bank statements usually don’t have enough detail on their own. Photos of receipts are fine.
Keep business records for five years. If you depreciate an asset, keep the purchase receipt and depreciation details for five years after your final claim.
Accounting software with receipt capture makes this easy. Our guide to the best accounting app for sole traders compares Xero, MYOB and QuickBooks.
See Xero plans Affiliate link. Opens the merchant site in a new tab.
When to lodge
The ATO says sole traders generally get the most complete pre-filled information after 28 August, once taxable payments reported by builders and others on the TPAR are available. If you use a registered tax agent, different lodgement dates may apply. Remember that businesses must lodge a tax return even if they earned very little.
Mistakes to avoid
- Claiming the full cost of something you also use privately.
- Claiming tools your employer supplied or paid you back for.
- Claiming everyday clothes because you wear them to work.
- Writing off an asset in the year you paid but before it was used.
Quick checklist for tax time
- Separate business and private spending through the year.
- Photograph every receipt when you get it.
- Keep a logbook or other record of business use for your vehicle.
- List tools and equipment bought, with dates first used.
- Work out the business percentage of your phone and internet.
- Check the ATO’s current instant asset write-off rules and car limit.
- Talk to a registered tax agent before claiming anything you’re unsure about.
Compare: see MYOB plans Affiliate link. Opens the merchant site in a new tab.
Common questions
Can tradies claim work boots and hi-vis?
Yes, generally. The ATO lists protective clothing and footwear such as hi-vis vests and steel-capped boots, plus safety glasses, helmets, earmuffs, and sunscreen, sunhats and sunglasses where you must work outdoors.
What is the instant asset write-off for tradies?
For small businesses with aggregated turnover under $10 million that use the simplified depreciation rules, the ATO says the $20,000 instant asset write-off was made permanent from 1 July 2026. Eligible assets costing less than $20,000 each can be deducted in full in the year they're first used or installed ready for use. The limit applies per asset.
Can I claim my ute?
As a business, you can claim vehicle expenses to the extent the vehicle is used in your business. The ATO says a vehicle with a carrying capacity of one tonne or more, such as many utes, isn't a car for these rules, so you claim actual expenses for the business portion and the cents per kilometre method doesn't apply.
How long do I keep receipts?
The ATO says business records must generally be kept for five years. Employees must keep records for five years after lodging their return.
