Tradie Tools: Expense or Asset?
- johnry8
- Sep 5
- 2 min read
If you are a tradie, your tools are your livelihood. But when it comes to tax time, many are unsure whether a tool is considered an expense or an asset. The classification matters because it affects how you claim deductions, manage cash flow and plan for future upgrades.
Some workers think every purchase can be written off right away, but they do not realise that certain tools need to be depreciated over time. Getting this wrong can mean missed opportunities for deductions or problems with the ATO down the track.
Understanding how tools are treated for tax purposes helps you stay compliant, save money, and make smarter choices about investing in your business.
Breaking It Down
1. What Counts as an Expense?
Small purchases, usually under the ATO’s instant asset write off threshold, can often be claimed as an immediate deduction. These are items that are used up quickly or are low in value, such as safety gear, hand tools or replacement parts.
2. What Counts as an Asset?
Larger purchases that last for years. Power tools, machinery or equipment are generally considered assets. The value of these items does not fall under the instant asset write-off and they are therefore depreciated over time.
3. Why the Difference Matters
Knowing if an item is an expense or an asset, changes how you claim it for tax. Immediate deductions can lower your taxable income right away, while depreciating assets spread the benefit over a longer period. Getting the classification right keeps you compliant and helps you budget for future investments.
4. Best Practices for Tradies
Keep clear records of all tool purchases including receipts
Know the current instant asset write off threshold (it can change from year to year)
Speak with your accountant before large purchases so you know how they will be treated
Use accounting software to track expenses versus assets correctly
Do’s and Don’ts
Do
Keep business and personal purchases separate
Take advantage of immediate deductions where possible
Plan big purchases around tax planning to maximise benefits
Don’t
Assume every tool can be written off instantly
Forget to check the ATO’s current rules each year
Miss out on deductions because of poor record keeping
Insights From Our Experience
At Rise Accountants we often meet tradies who are surprised at how much they could have saved if they classified their tools correctly. By keeping good records and understanding the difference between an expense and an asset, many find they can plan purchases better and claim with confidence.
Are you unsure whether your new tools should be listed as expenses or assets?