Practical advice from a tradie accountant
COVID-19 is having an undeniable impact on the economy. Governments around the world are putting financial measures in place to cushion the blow for businesses and support long-term economic recovery. But times are uncertain, and things are constantly changing.
Ryan Addinsall from Elevate Accounting Co. has worked exclusively with trade businesses for the past four years – he’s been in accounting for 15 years – and he says one of the best things tradies can do right now to keep their businesses running is to take advantage of COVID-19 government relief.
While a considerable amount of government support has been distributed already, there’s more coming, and it can be challenging to identify what you’re eligible for. With that in mind, we had a quick chat with Ryan to see what government initiatives are relevant to trade businesses – and how they might be able to help as you head into the new financial year.
Tax changes: instant asset write-off
This is an immediate form of support that will help tradies who need to invest in new assets like equipment or tech solutions. Governments have put in place a temporary increase to small business instant asset write-offs. In New Zealand, the threshold has gone up to $5,000 until March 17, 2021. In Australia it has gone up to $150,000 until December 31, 2020.
Immediate expensing allows businesses to fully deduct the price of low-cost assets when they are purchased. This will help reduce compliance costs for businesses and stimulate business purchases.
In practice, here’s what that means for tradies:
“My advice is, if you’re in a position where you’ve got the benefit of spending money on a new work vehicle, or any other kind of machinery or equipment up to the relevant threshold, you can get a substantial tax benefit by making sure that you purchase it, and have it installed and ready to use by the end of the financial year,” Ryan explains.
Apprentice incentive schemes
On top of supporting businesses, governments are also focused on keeping people in jobs. There are several incentives designed to help you manage cash flow, keep apprentices in training, and ensure the continued development of the skilled workforce that the economy needs.
For tradies in Australia, Supporting Apprentices and Trainees provides a wage subsidy to support the retention of existing apprentices and trainees. Also, if you’re an employer of an Australian Apprentice, you might be eligible for financial assistance to help with hiring and training an apprentice.
If you’re a New Zealand trade business, the government recently announced a $1.6 billion Trades and Apprenticeships Training Package. This provides opportunities for people to retrain or upskill. It also keeps those apprentices already in training employed.
Focus on cash-flow boosts
Anything that helps reduce expenses and keep cash flow steady will help struggling tradies, Ryan says.
“Make sure you’re receiving and getting the benefit from all the COVID-19 stimulus that’s out there at the moment. That includes cash-flow boosts, trade license-fee reductions or waivers, and any other state government assistance if you’re an Australian tradie.”
To keep your books tidy, Ryan says it pays to get professional help to make sure you’re accounting for all of the support correctly.
“Some of the stimulus that’s being received is non-accessible income. Almost all of it is GST free. You want to make sure you’re not declaring and paying tax on income that you don’t need to – it gets quite tricky,” he explains.
Lastly, improving efficiency and streamlining admin processes might not increase your cash flow, but it’ll certainly help you keep on top of things, Ryan says.
“The worst thing that a lot of trade businesses do is they don’t understand the things they could be doing to get themselves in a better position. Have your books up to date so your accountant can give you advice – and so you don’t miss an opportunity,” he advises.
Find out what you’re eligible for – or get help
No one knows how long COVID-19 will cast a shadow of uncertainty over life as we know it, but for the time being, it’s business as usual – or as close to it as you can get.
Financial support from the government provides a much-needed lifeboat for many businesses struggling to get back on their feet after lockdown – and tradies should make sure they’re using the support that they’re eligible for. If you’re not sure what funds you’re entitled to, or how to factor in government support in your accounting system, then have a chat with your accountant.