Bookkeeping for the Construction Industry: Deductions and Checklist for Tradies

As we step into a new financial year, it’s the perfect time for tradies in the construction industry to get their bookkeeping in order. Proper bookkeeping is not just about staying compliant with the ATO; it’s about maximising your deductions, improving cash flow and setting your business up for success. In this article, we’ll cover the key tax deductions available to tradies and provide a comprehensive checklist to keep your finances in top shape.

Why Proper Bookkeeping Matters for Tradies

Proper bookkeeping is crucial for tradies for several reasons:

• Ensuring Compliance with the ATO: Accurate records help you stay compliant with tax regulations, avoiding penalties and audits.
• Maximising Deductions and Minimising Tax Liabilities: Keeping detailed records allows you to claim all eligible deductions, reducing your taxable income.
• Improving Cash Flow Management: By tracking income and expenses, you can better manage your cash flow, ensuring your business remains financially healthy.

Common Tax Deductions for Tradies in the Construction Industry

Understanding what you can claim as a deduction can significantly impact your tax return. Here are some common deductions for tradies:

• Tools and Equipment: The cost of tools and equipment used for work can be claimed as a deduction. This includes purchases, repairs and maintenance.
• Vehicle Expenses: You can claim deductions for vehicle expenses related to work including fuel, maintenance, registration, insurance and depreciation.
• Work-related Clothing and PPE: Deductions are available for protective clothing, uniforms and safety gear required for your job.
• Training and Education: Expenses related to improving your skills and obtaining certifications can be claimed.
• Home Office and Mobile Phone Costs: If you use a home office or your mobile phone for work purposes, you can claim a portion of these expenses.

Important Records to Keep Throughout the Financial Year

Maintaining thorough records is essential for accurate bookkeeping and maximising deductions. Key records to keep include:

• Income Records: Invoices, receipts and payment confirmations are vital for tracking your income.
• Expense Records: Keep receipts for all business-related purchases, travel logs and bank statements.
• Tax Documents: Previous tax returns, Business Activity Statements (BAS) and GST records should be organised and accessible.
• Employee Records: If you have employees, maintain timesheets, payroll summaries and superannuation contribution records.

Monthly Bookkeeping Checklist for Tradies

Staying on top of your bookkeeping is easier with a monthly checklist:

Reconcile Bank Accounts:

• Ensure all transactions are recorded and matched with your bank statements.
• Identify and address any discrepancies.

Track and Categorise Expenses:

• Record all business-related expenses.
• Categorise expenses into appropriate categories (e.g., tools, vehicle expenses, office supplies).

Invoice Management:

• Issue invoices promptly after completing a job.
• Track outstanding invoices and follow up on overdue payments.

Review Cash Flow:

• Monitor your income and expenses.
• Prepare a monthly cash flow statement to identify any cash shortages or surpluses.

Employee Payroll:

• Process payroll accurately and on time.
• Ensure superannuation contributions are calculated and paid.

GST and BAS Preparation:

• Collect and record GST on sales.
• Track GST paid on business expenses.
• Prepare and lodge your Business Activity Statement (BAS) quarterly.

Expense Receipts and Documentation:

• Collect and organise all receipts for business expenses.
• Ensure receipts are stored in a secure, accessible location.

Update Financial Records:

• Regularly update your accounting software with new transactions.
• Review and correct any errors in your financial records.

Budget Review:

• Compare actual expenses and income to your budget.
• Adjust your budget as needed based on performance.

End-of-Financial-Year Bookkeeping Checklist

As the financial year ends, a thorough review of your finances is essential:

Prepare Financial Statements:

• Compile your Profit and Loss Statement.
• Prepare a Balance Sheet and Cash Flow Statement.

Review Outstanding Invoices:

• Follow up on any unpaid invoices.
• Consider writing off bad debts if necessary.

Stocktake:

• Conduct a physical count of your inventory and materials.
• Value your stock and update your records.

Audit Documentation:

• Ensure all records are complete and organised for potential audits.
• Double-check that you have supporting documents for all deductions claimed.

Review Tax Deductions:

• Ensure you’ve claimed all eligible deductions (tools, vehicle expenses, PPE, etc.).
• Verify that you have documentation to support each deduction.

Employee Superannuation:

• Confirm that all superannuation contributions have been made.
• Ensure that super payments are up to date.

End-of-Year Tax Planning:

• Review your taxable income and plan for tax payments.
• Consult with a tax professional to optimise your tax strategy.

Backup Financial Records:

• Create backups of all important financial records.
• Store backups in a secure, off-site location or in the cloud.

Review Insurance Policies:

• Ensure your business insurance policies are current and provide adequate coverage.
• Update your insurance as necessary to cover new assets or changes in your business.

Professional Review:

• Schedule a review with your accountant or bookkeeper.
• Discuss any concerns and plan for the new financial year.

Tips for Simplifying Bookkeeping with Technology

Leverage technology to streamline your bookkeeping processes:

• Use Accounting Software: Platforms like Xero, MYOB or QuickBooks can simplify bookkeeping, making it easier to track income and expenses.
• Cloud Storage: Securely store and access records online, ensuring you have access to your documents anytime, anywhere.
• Mobile Apps: Utilise mobile apps to track expenses and issue invoices on the go, keeping your bookkeeping up-to-date in real time.
• Utilise Add-Ons: Enhance your bookkeeping system with add-ons like Simpro, Dext and ServiceM8 to automate data entry and integrate seamlessly with your existing software.

Conclusion

Proper bookkeeping is essential for tradies in the construction industry. By understanding your deductions, keeping thorough records and following a regular bookkeeping checklist, you can ensure your business remains compliant and financially healthy. As we start this new financial year, take the time to organise your finances and set your business up for success.

If you need more information or personalised assistance with your bookkeeping, contact us today. We’re here to help you navigate the new financial year with confidence. Book a free consultation and let us support your business with our expert bookkeeping and CFO services.