Tradie Tax Deductions 2025–26: Calculate What You Can Claim

Dave Chen is 38, a plumber based in Melbourne earning $95,000 a year. He owns a ute, a full kit of trade tools, and works five job sites a week. Every tax time he claims what he thinks is right. When he ran his numbers through a calculator, the biggest gap was his ute: not what he claimed, but how.

This guide covers the deductions available to Australian tradies in 2025–26 and the rules the ATO checks at tax time. Figures are from the ATO and apply to 2025–26 returns unless a different year is shown.

What Tradies Can Claim in 2025–26

The ATO's occupation guide for tradespersons sets out seven primary deduction categories. To claim any of them, the expense must be directly connected to your income-earning activities, paid by you (not reimbursed), and substantiated with a receipt if your total work-related claim exceeds $300.

Source: ATO Tradesperson occupation guide (ato.gov.au), verified May 2026.

Replacing the ute? Stamp duty on the purchase differs by state — work out the duty before you sign.

The Ute Rule: Actual Costs vs Cents per Km

The cents-per-kilometre method (88c for 2025–26, 91c for 2026–27, up to 5,000 km) applies only to cars. The ATO treats a vehicle as a car if it's designed to carry less than one tonne and fewer than nine passengers.

Many work utes are designed to carry one tonne or more. Those aren't cars under the tax rules, so you can't use cents per km or the logbook method. Instead you claim the actual running costs (fuel, servicing, registration, insurance, loan interest and the decline in value) for the work-use share. You need records that show how you worked out that share, such as a diary of work trips. The ute's carrying capacity (payload) is in the manufacturer's specifications.

If your ute carries less than a tonne, it's a car: you can choose cents per km or the logbook method.

For a car, cents per km is capped at 5,000 km: $4,400 at 88c for 2025–26, or $4,550 at 91c for 2026–27. The logbook method has no kilometre cap, so it often gives more for high-kilometre drivers.

Tools and Equipment: The $300 and $20,000 Rules

Tool deductions follow a two-tier rule. An item costing $300 or less that is used only for work can be claimed in full in the year you buy it. An item costing more than $300 must generally be depreciated over its effective life — unless you qualify for the instant asset write-off.

For the 2025–26 income year, businesses (including sole traders) with an aggregated annual turnover under $10 million can immediately deduct the full cost of eligible assets costing less than $20,000. This applies per asset — you can write off multiple items. The $20,000 threshold is permanent from 1 July 2026 (law since August 2026), so it applies in 2026–27 and later years too.

PPE, Workwear, and What Counts as Deductible Clothing

Protective clothing and safety gear is fully deductible — but ordinary clothing is not, even if you only wear it at work. The ATO's test is whether the clothing provides protection from injury or is required by your employer.

Deductible items include: steel-cap boots, hi-vis vests and jackets, hard hats, safety glasses, gloves, and work pants with specific protective features (e.g. flame-resistant, reinforced knee pads). Plain black work trousers are not deductible even if worn every day on-site.

Source: ATO work-related clothing deductions guide (ato.gov.au).

What You Cannot Claim: Where Tradie Claims Go Wrong

Work-related expenses are a long-running ATO focus. Once your total work-related claims are over $300, you need written evidence for all of them. Three errors are common for tradies:

1. Home-to-work travel. Driving from home to your first job site is usually private travel, even if you carry tools. The exception is bulky tools you need for the job when there's nowhere secure to leave them at the site. Travel between sites during the day is deductible.
2. Using cents per km on a heavy ute. As covered above, cents per km only applies to cars. On a ute that carries a tonne or more, the claim has to be the work-use share of actual costs.
3. Tool claims without receipts. You can claim up to $300 in total work-related expenses without written evidence — but this is a combined total, not per item. If your tools claim alone exceeds $300, you need receipts for every item.

Dave's Numbers: A Melbourne Plumber's Deduction Breakdown

Dave earns $95,000 as a Melbourne plumber. His ute carries more than a tonne. Here is what his deduction claim looks like for 2025–26, using actual costs for the ute and the $300 immediate deduction for his tools:

Illustrative. Dave's taxable income: $95,000 − $11,320 = $83,680. At 32% (30% tax plus the 2% Medicare levy), estimated tax saving on his 2025–26 return: ~$3,622. Use the Velofy calculator to model your own figures.

If Dave ran his own plumbing business with turnover under $10 million, a $3,800 drill press would qualify for the $20,000 instant asset write-off. Bought and installed ready for use by 30 June 2027, it would be deducted in full on his 2026–27 return: about $1,216 less tax at 32%.

Complete Tradie Deduction Reference: 30 Items Ranked by Dollar Value

Beyond Dave's $11,320 breakdown, here are 30 deductions Australian tradies can legitimately claim — ranked by typical dollar value at a representative $95,000 tradesperson income (30% tax rate + 2% Medicare levy = 32% for 2025–26 and 2026–27). Sole-trader-specific claims marked "sole trader"; PAYG-employed tradies use the standard work-related deduction labels D1-D5.

Dollar values are typical 2025-26 figures based on published union, licensing, and retailer data. Tax savings assume a 30% tax rate + 2% Medicare levy. The $20K instant asset write-off applies only to sole traders / small businesses with aggregated turnover <$10M (per ATO IAWO page); the $20K threshold is permanent from 1 July 2026 and has been law since August 2026. Rules checked against the ATO Tradies guide.

Before 30 June 2027 — Two Things to Time

First, the $20,000 instant asset write-off. If you run a business with turnover under $10 million, an eligible asset bought and first used or installed ready for use by 30 June 2027 is deducted in full on your 2026–27 return. The $20,000 threshold is permanent from 1 July 2026 and has been law since August 2026. An asset delivered or set up in July 2027 counts for 2027–28 instead.

Second, your vehicle records. If you've been using cents per km on a ute that carries a tonne or more, switch to actual costs and keep a diary of work trips from now on, so your 2026–27 claim has records behind it. A registered tax agent can tell you whether earlier returns need correcting.

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