Tradie Tax Deductions 2025: 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 — but until he ran his numbers through a calculator, he had no idea he was leaving more than $3,700 on the table each year. The issue wasn't what he was claiming. It was how.

This guide covers every deduction available to Australian tradies in 2025–26 — and the specific rules the ATO is focused on at tax time. All figures are sourced directly from the ATO and verified for the current financial year.

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.

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The Ute Rule: Logbook vs 88c/km

This is the most misunderstood rule in tradie tax — and the most expensive mistake to make. The 88c/km cents-per-kilometre method applies only to cars. A car is defined by the ATO as a motor vehicle designed to carry fewer than nine passengers and with a carrying capacity of less than one tonne.

Most tradies drive a ute with a carrying capacity of one tonne or more — which means it does not meet the ATO's definition of a "car." You cannot use the cents-per-km method on a ute. You must use the logbook method, tracking your actual business kilometres as a percentage of all kilometres driven.

Even if you drive a regular car and can use cents-per-km, the logbook method is often more valuable for high-km tradies. The 5,000 km cap on cents-per-km ($4,400 maximum claim at 88c/km) becomes a ceiling — the logbook method has no cap.

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 threshold drops to $1,000 from 1 July 2026, so equipment purchased before 30 June 2026 and first used or installed by that date qualifies.

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: The ATO's Audit Targets for Tradies

The ATO's 2025 tax time focus includes work-related expenses with over $300 in total claims — these require written evidence. For tradies, three specific errors are repeatedly flagged:

1. Home-to-work travel. Driving from home to your first job site is private travel. It is not deductible, even if you carry tools in your ute. This applies regardless of how far you drive or how early you start. Travel between sites during the day is deductible.
2. Using cents-per-km on a ute. As covered above, the 88c/km method only applies to cars. Using it on a ute is an incorrect claim that the ATO identifies through STP data matched against vehicle registration records.
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. Here is what his optimised deduction claim looks like for 2025–26, using the logbook method on his ute and the $300 immediate deduction on his tools:

Illustrative. Dave's taxable income: $95,000 − $11,320 = $83,680. At 30% Stage 3 marginal rate, estimated tax saving: ~$3,396. Use the Velofy calculator to model your own figures.

If Dave also qualifies for the $20,000 instant asset write-off and purchases a new drill press for $3,800 before 30 June 2026, his total deductions rise to $15,120 — a tax saving of approximately $4,914 at his marginal rate.

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 (Stage 3 marginal rate 30% + 2% Medicare = 32%, in force since 1 July 2024). 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 30% Stage 3 marginal rate + 2% Medicare. $20K Instant Asset Write-Off applies only to sole traders / small businesses with aggregated turnover <$10M for FY2025-26 (per ATO IAWO page); the 12 May 2026 Budget announced permanence at $20K from 1 July 2026 but legislation is pending. Verified against ATO Tradies guide on 2026-05-24.

Act Before 30 June 2026 — Two Things to Time

Two significant tradie deduction levers are most valuable before 30 June 2026. First, the $20,000 instant asset write-off — any eligible asset purchased and first used or installed by 30 June qualifies for an immediate deduction under the legislated FY2025-26 rules (Treasury Laws Amendment Act 2025). The 12 May 2026 Federal Budget announced making the $20,000 threshold permanent from 1 July 2026, but that legislation is not yet law as of mid-2026 — if the bill doesn't pass, the default reverts to $1,000. Two scenarios, one conclusion: buying a generator, compressor, or power tool over $1,000 before 30 June locks in the $20,000 treatment with certainty regardless of what happens with the Budget bill.

Second, if you have never kept a vehicle logbook and have been using cents-per-km on your ute, starting a logbook now captures the next 12 weeks — placing you in a strong position for a retrospective claim review with a registered tax agent before 30 June.

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