Stacey Price from MYOB brings us her top 5 things tradies say that raise the eyebrows of accountants – and can get you into hot water with the ATO! But no worries, she’ll be right mate, we’ve got some easy suggestions & clarifications for you too. ~WizeOwl
Tradies. We couldn’t live without them. I mean, most people don’t know how to change a washer, how to unblock the toilet or even how to change a light bulb – but it seems that most couldn’t live without their accountant.
While we feel that we’re all experts (thanks Bunnings and Better Homes and Gardens for giving us DIY enthusiasts unchartered confidence), tradies are the glue (or at least they provide it) that keeps most households together.
From plumbers to electricians, to painters to carpenters, to builders and everything in between. They are handy men and women who fix things for us. But who fixes the things tradies can’t fix?
I’m going to be blunt here – tradies are not known for their record keeping, bookkeeping skills and love of numbers.
I mean have you seen the glove box of some tradies utes? It is like a filing cabinet on steriods.
If by chance you take the risk at opening the glove box, the crumpled receipts attack you from all directions. As an accountant, it’s my job to get this crumpled mess into working order – all while fielding some pretty curly questions.
So, what’s some of the sh*t we hear tradies say?
“I have a work ute that I use soley for work – can I claim it?”
Now it’s not unusual for tradies to have utes. Throw the tools in the back, ladders, equipment – makes perfect sense right? What doesn’t makes sense is the ‘100 percent for work’ thing.
Especially when said ute has Deni ute muster stickers all over it, not to mention the high-powered spotlights that would only be used for fox/rabbit shooting. I may be a chick, but I grew up in the country and I know what those lights are for.
“I have a guard dog to protect my tools. The dog comes onsite in my work ute so I want to claim all costs relating to my dog.”
On paper this seems legit, but a guard dog must be an actual “rip your am off if you come near my tools” kind of dog.
So it was with huge surprise when I visited a tradie (quietly sh***ing myself that I was about to be attacked by a Rottweiler or something equally sinister), to instead be greeted by a one eyed, blind, deaf, fluffy terrier who wanted to lick me to deaf and couldn’t even jump into the ute in the first place.
You can claim costs for the guard dog, it just needs to be capable of…guarding things.
“Nah mate, that job didn’t go ahead, just delete the invoice”
Sure thing, but to me this just screams “cash job”.
Builders need to be especially careful with this as often the invoice has the address of the job site on it, which makes the audit trail easier to follow than the Yellow Brick Road.
That’s not to mention the 27 pictures the builder uploaded to their social media showing off the completed project.
Cash jobs, where you are claiming expenses but not the income, open up a can of worms as your numbers will be out of whack.
“Oh yeah, I bought some work uniforms for our subbies so if you see a receipt for David Jones that’s what it is”
Now, I must admit I am not a frequent shopper at David Jones, but I didn’t know they had a section for protective clothing and steel capped work boots?
Rest assured, the receipt tells a different story. A designer frock and heels for the partner won’t pass the “protective clothing” test.
Remember that any story you tell your accountant, the ATO can ask for proof.
If the receipt tells a different story, you’ll immediately be in hot water.
“My staff are so dedicated, they often work seven days a week for me. I’m lucky they’re cheap otherwise they would cost me a bomb!”
Often a tradie can find a couple of mates to help with a weekend job, and said mates will often accept mates’ rates.
OK so there are two issues I have with this – you need to pay them minimum wage plus all eligible on costs, and secondly you should be factoring in all costs for your staff (including superannuation) into the job.
So ultimately, whatever you are invoicing your clients covers your costs plus your profit margin.
You may even need to pay these staff overtime if they’re working weekends and penalty rates may apply. Just because they’re your mates doesn’t mean it won’t bite you in the bum down the track.
So tradies, hear it from me – you aren’t immune to ATO rules and regulations no matter how many cash jobs you do.
In fact, trades are always a hot spot for ATO audits, payroll investigations and instances where the cash economy proves the numbers just don’t add up.
Whilst you may have a work ute, one of its features should not be a storage system for your receipts.
Getting help and guidance from a qualified accountant or BAS agent in those early days, will really set your business up without the added headaches and stress of an ATO audit coming your way.
Did you know Bizwize is a qualified BAS agent? We have heaps of clients in building, construction & utilities, and we’d love to help you out. Contact us today using the side bar >>