The tools you buy yourself are the biggest deduction most tradespeople have, and also the one most often claimed wrong. A drill, a grinder, a nail gun, the toolbox they live in: you paid for them because the job needed them, so the money is yours to claim. What trips people up is not whether a tool counts, but how you claim it, and the answer turns on one number. Get the $300 line right and the rest of your tool spend falls into place.
The $300 line
How you claim a tool depends on what it cost you, and this is the mechanic behind every other point on the page.
You claim the full cost in the year you buy it. The cheap hand tools, the batteries, the blades and bits: each one under $300 comes straight off this year's return.
You claim the decline in value, spread across its effective life. You choose prime cost (the same amount each year) or diminishing value (more early, less later) and stick with it for that tool.
Apportion private use and part-year ownership: if you also use a tool at home, claim only the work-use share, and if you bought it partway through the year, you only count the days you held it. The two errors people make are opposite each other: claiming an expensive power tool in full in year one when it has to be spread, and assuming a $480 kit isn't claimable because you can't write it off at once. It is claimable, just over several years.
The set trap
This is the rule that catches tradespeople most, because it defeats the obvious workaround. You cannot dodge the $300 line by buying an expensive set one cheap piece at a time.
Sixteen spanners bought individually at $22 each come to $352. As a set that is over $300, so there is no immediate write-off.
A set, or a group of identical or substantially identical items you start to hold in the same year, that together costs more than $300 must be depreciated even though every piece is cheap. That's the ATO's own example. The later replacement is different though: if one spanner wears out and you buy a single replacement later, that one isn't part of a set bought that year, so it's deductible in full the year you buy it.
Depreciation keeps going
A tool over $300 does not only appear on the return the year you buy it. You keep claiming this year's slice of its decline in value every year until the tool is written down to nothing, and this is the part people forget once the purchase is a couple of returns behind them. The grinder you bought two years ago still has value left to claim this year, so pick it up on this return, not just the year you paid for it. The decline-in-value figure comes off the tool's remaining value and its effective life, and the ATO's own depreciation tool works it out for you.
Repairs, insurance, hire
The $300 line governs buying a tool. It does not govern keeping one working, insuring it or renting one, and those are deductions in their own right.
The write-off that isn't yours
Every generic trades tax article pushes the instant asset write-off, and for a PAYG employee it is a trap. It is not your rule.
The instant asset write-off lets a small business immediately deduct assets up to a cap the ATO sets, and it is turnover-tested. It belongs to businesses running an ABN, not to employees. As a PAYG worker your line is exactly the one on this page: $300 or less immediate, over $300 depreciate. The write-off cap you see quoted online does not apply to you. If you're unsure whether you're an employee or a subcontractor on an ABN, that changes what deductible means for everything, not just tools.
The tool allowance catch
A tool allowance on your payslip feels like it settles your tool claim. It does the opposite: the allowance is income, and your deduction is separate.
The records behind a tool claim
Every tool above stands on the receipt behind it, and a tool-heavy claim is where the paper trail tends to leak.
- A receipt for every tool. Date, supplier, item and cost, kept for five years.
- A note of any work-use split for anything you also use at home, because that split is the first thing questioned.
- Records for everything if your total work-related claims come to more than $300 across the year, not just the big-ticket items.
The bottom line
Sort every tool by what it cost. Under $300 comes off in full this year, over $300 is spread across its life, and a set is judged as a whole no matter how cheap each piece is. Keep claiming last year's tools until they are written off, add the repairs, the specific tool insurance and the hire, and leave the instant asset write-off to the businesses it was built for. Declare a tool allowance as income and claim your real spend against it. Do that with the receipts to back it, and your tool bill lands on your return where it belongs.
See what your tools, insurance and other work claims come to at tax time.
General information only, not tax advice. Check the ATO or a registered tax agent for your situation.