Key Takeaways
- The $20,000 instant asset write-off has been extended to 30 June 2026 for eligible small businesses
- Vehicles with a carrying capacity of over one tonne (like many dual-cab utes) offer superior tax benefits and are often exempt from the “car limit”
- A valid 12-week logbook is the most effective way to maximise vehicle deductions for high-use business cars
- Tools and equipment costing $300 or less can be written off immediately, while larger items may fall under the instant asset write-off
- Record-keeping is non-negotiable—the ATO’s myDeductions tool is an easy way to track receipts on the go
For most tradies, vehicles and tools are your biggest investments. They are also your biggest opportunities to reduce your tax bill. However, the rules around what you can claim—and how you must track it—change frequently.
With the 2025–26 financial year underway, there are several strategic ways to ensure you aren’t paying more tax than necessary while staying firmly on the right side of the ATO.
1. Maximise the $20,000 Instant Asset Write-Off
The Australian Government has extended the $20,000 instant asset write-off until 30 June 2026. This is a massive win for small businesses with an aggregated turnover of less than $10 million.
Under this rule, you can immediately deduct the full cost of eligible assets that cost less than $20,000. This applies on a “per asset” basis, meaning you could buy a new generator, a high-end diagnostic tool, and a second-hand trailer, and write them all off in the same year—provided each one is under the $20,000 threshold.
The Tipping Point: To claim the deduction this financial year, the asset must be “first used or installed ready for use” by 30 June. Simply paying the invoice isn’t enough; the tool needs to be in your shed or on your truck.
2. Choosing the Right Vehicle for Tax Efficiency
Not all work vehicles are treated equally by the ATO. Understanding the “One-Tonne Rule” can save you thousands.
- Standard Cars: If you use a sedan or a small SUV, your depreciation is capped by the “car limit” (currently $69,674 for 2025–26). Even if you spend $100,000 on a luxury car, you can only claim up to that limit.
- Commercial Vehicles: If your vehicle is designed to carry a load of one tonne or more (which includes many popular 4WD dual-cab utes), it is often exempt from the car limit. This allows you to potentially claim the full business-use percentage of the purchase price, regardless of the cost.
3. Logbook vs. Cents per Kilometre: Which Wins?
When it comes to running costs (fuel, rego, insurance, and servicing), you usually have two choices for cars:
Cents per Kilometre Method
For 2025–26, the rate is 88 cents per kilometre, capped at 5,000km per year. This is simple and requires no receipts, but it limits your total deduction to $4,400. For most full-time tradies, this method leaves money on the table.
The Logbook Method
This involves keeping a logbook for 12 continuous weeks to prove your business-use percentage. If your logbook shows 85% business use, you can claim 85% of all running costs plus 85% of the vehicle’s depreciation. For a vehicle with high running costs, this almost always results in a significantly larger tax refund.
4. Don’t Miss the “Bulky Tools” Exception
Usually, you cannot claim the travel between your home and your first job site. The ATO views this as a private “commute.”
However, there is a vital exception for tradies: if you are required to carry bulky tools or equipment for work (such as ladders, jackhammers, or heavy toolboxes) and there is no secure storage for them at the worksite, your entire trip from home to site becomes tax-deductible.
5. Pre-paying Expenses Before 30 June
If you have a strong cashflow month in May or June, consider pre-paying expenses for the year ahead. You can claim an immediate deduction for things like:
- Professional memberships or union fees
- Work-related insurance premiums
- Technical subscriptions or software (like Xero or job management tools)
This “brings forward” the tax benefit into the current year, helping you manage your tax liability more effectively.
Final Thoughts
Tax minimisation isn’t about “dodging” the rules; it is about using the existing frameworks to your advantage. By choosing the right vehicle, keeping an accurate logbook, and timing your equipment purchases, you can keep more of your hard-earned money in your business.
Ready to plan your end-of-year purchases? Speak to Toyne Accountants to ensure your equipment and vehicle strategy is optimised for the current tax year.
