The Ultimate Checklist For Plumbers For Tax Season

Considering that you have till 31 October to file a tax return or at least register with a tax agent, you still have a healthy time span to work with. It’s always best not to wait until the last minute, however.

With a lot of systems that have changed because of the pandemic, there’s new information you’ll need to get accustomed to.

This is because some businesses closed or changed the way they work. You’ll be happy to know that there’s a couple of benefits you could possibly gain.

Tax season isn’t generally a favorite for most Australians but we’ve set up a checklist that is guaranteed to help you set up before your time runs out.

Tax Season For Plumbers

1.  Income Documentation

First things first, the ATO (Australian Tax Office) needs to know how much your plumbing business income is. You’ll find that most forms of income are subject to tax but there are always a few exceptions.

An example is Not-for-Profit Organizations (NFP) but only if they’ve actually been endorsed by ATO. They have a helpful flowchart on their website that can help you work out if your income can be exempted.

Documents that state your income include:

PAYG payment summary

For regular employees (those who are on full-employment), the PAYG or pay-as-you-go withhold is the holy grail of their taxes.

This is essentially the amount withheld for tax purposes by the employer from their pay. It is sent to ATO.

Super pensions and annuities

Income that you have received in the form of pension should be declared under Super pensions and annuities. This, however, does not include government payments such as the age pension.

What you’ll need to declare depends on your age and the type of stream of income you receive. The different types of items needed in your tax return include:

  1. A Taxed element – this is the part of your benefit that has already been paid in terms of tax
  2. Untaxed element – the part of your benefit that can still be taxed because no taxes have yet affected the fund
  3. A tax-free component – the tax-free part of your benefit

 Other sources of income

  1. Government payments and allowances
  2. Foreign income
  3. Business, partnership, and trust income
  4. Investment income (this includes dividends, rent, interest, and capital gains tax)
  5. Other income such as deductions, compensation, insurance payments, discounted shares and others.

For a thorough view of income, declarations refer here.

Generally, if you made any money this year it’s wiser to document it. Some sources of income give you the required documents whilst others will need your active effort to keep records.

2. Previous year’s tax returns

Keep in mind that you don’t really require tax returns from the previous year to do the current year’s. If all your other relevant documents are available then you’ll be all set!

Tax rules tend to differ from year to year but referring to how you did the previous year’s taxes can be immensely helpful.

If you decide to outsource an accountant to do your taxes, chances are they’ll request last year’s tax return as a reference.

In case you’ve decided to lodge online using myTax, most of the information used to set your gross income will be from data entered in the previous year or using tax return documents from last year. It’s alright too if you had captured this information elsewhere.

3. Tax credits and deduction documents.

When handled properly, both tax credits and deductions can reduce your plumbing tax bill. We’ve taken the liberty to mention the two important tax advice for plumbers to ensure that you get the most out of your tax payments.

ATO is urging taxpayers to follow these steps for better user experience when lodging their tax returns. This comes after they have completely replaced paper lodgements.

Tax credits and deduction documents simply reduce the amount of taxes payable on a monetary basis. To get the best out of this opportunity you’ll need to capitalize fully on the number of tax credits and deductions you can take. Of course, this will require you to have adequate documentation and supported records to pull it off.

Here’s a list of deductions you can possibly claim this year:

If your money was spent on something you needed for work but your company did not reimburse you for it, you have every right to claim a deduction for it. Again, this works if you have documents to prove it such as a bank statement or a receipt of purchase.

If this is a tool that you ended up using privately, the ATO will only deduct the amount for work purposes.

Due to the fact that work conditions have changed due to the pandemic, the list of deduction claims has also diversified.

Here’s what’s on claim right now:

Car expenses

Vehicle or any other travel expenses you might have incurred in order to do your work can be claimed. Keep in mind that travel expenses from home to work or vice versa are under commuting expenses which are non-deductible.

Occupancy expenses

If your chief place of work is at home and you have a room or space relegated to your business activities, you just might be able to claim a deduction.

The deduction will be on rent, your rates, or even mortgage. ATO explains that you can calculate the amount to claim by measuring the floor area as a piece of the floor area in your whole home.

Please note that this won’t apply if you’re only working from home due to the pandemic. 

Self Education expenses

If you used some funds to educate yourself in relation to plumbing, you’re liable to claim a deduction. This also applies if you received a taxable bonded scholarship.

ATO advises that you’ll be able to get a deduction if the course makes allowance for you to get a salary increment and improves your plumbing knowledge or skills. You should be able to produce a formal qualification too.

If you’re interested in the full list of deductions you can claim, you can find the lists here.

Tax season shouldn’t feel overwhelming. If you’d require more help on tax compliance, feel free to give us a call. We’d love to help you out.

Tradies Accountant