Vehicle and tool deductions: the records a builder needs

Vehicles and tools are often the largest costs a builder carries, and they are also the costs most often claimed too generously. A ute that is used for the job and for the family, a set of power tools that is partly used for a side job, and a phone that takes client calls at night can each be deductible in part. None of them is deductible in full unless the records show that it was used only for the business. The difference between a claim that holds up and one that does not is almost always the record.

This article is about the records and the private-use boundaries behind vehicle and tool deductions: what has to be recorded, how private use is separated from business use, and how digital tools help or hinder the process. It does not cover GST, business activity statements or superannuation, which are dealt with in the article on GST and BAS for builders. It is general information about the principles, not advice on your tax position. The rules change, and the detail for any particular year should be checked against current Australian Taxation Office guidance or with a registered tax agent.

Why a deduction needs a business link and a record

A deduction is available for expenses that relate to earning the income of the business. The question is never simply whether an item was used at work. It is whether the expense is connected to the work in a way the Australian Taxation Office would accept, and whether the business can show it. Those are separate tests. A tool used every day on site is connected to the work. A tool used at home for a hobby is not, and a tool used for both is connected in part, which means the claim has to be split.

The burden of proof sits with the taxpayer. The Australian Taxation Office does not need to show that a claim is wrong. The business has to be able to show that it is right. That is why records matter more than memory. A builder who remembers that the ute was mostly used for jobs will struggle when the question is which jobs, on which days, and for how far. The record is the answer, and it has to be produced when it is asked for, not reconstructed afterwards.

A useful test is whether someone checking the records could follow each claim without the builder explaining it. Each line should carry a date, a description, an amount, a purpose and a reference to the document that supports it. A claim that can be followed that way rarely needs a long explanation at audit. A claim that depends on the builder remembering what a trip was for, or why a tool was bought, is fragile, and the explanation may not be accepted once the memory has faded.

Vehicles: the two methods and what each needs from you

A builder claiming a work vehicle generally has a choice of method. One is the logbook method, where the business records its use over a continuous period set by the Australian Taxation Office, and then applies the business percentage to the year’s costs. The other is the cents-per-kilometre method, where the business claims a set rate for each business kilometre, within a limit the Australian Taxation Office sets for the year. Each has its own rules, and the choice matters because it changes what must be kept.

The logbook method asks for more effort at the start and less later. The log should show the date, the odometer readings, the purpose of each trip and the kilometres travelled. A log kept for the required period can then be used to set the business percentage for the following years, provided the vehicle’s use does not change materially. Builders who run a single ute across many sites often find this method pays off, because the log captures the mix of business and private trips that makes up the real picture.

The cents-per-kilometre method is simpler to start, but it demands a credible record of the business kilometres. A builder who claims it has to be able to show the kilometres driven for work, and an estimate made at year end will not hold up. The method is limited for each vehicle, so a builder who drives a great deal for work may find the logbook method gives a better result. Whichever method is chosen, the record has to support it.

Whichever method is used, the vehicle’s costs have to be split between business and private use. Fuel, registration, insurance, servicing and depreciation are all affected. A builder who claims every cost of a vehicle the family also uses is claiming private expenses, and that is one of the most common problems in this area. The split has to match the record, not the other way round.

Travel between home and work

Travel between home and a regular workplace is generally treated as private, and the exceptions are narrow. A builder who starts each day at home and drives to the first site is in the usual position, and the trip is not deductible merely because the destination is a job. A builder who carries bulky tools in the vehicle, or who has a regular workplace that is not the site, may be in a different position. The exceptions turn on the specific facts, so check the Australian Taxation Office guidance on home-to-work travel before making the claim.

The same logic applies to trips that combine a site visit with a private errand. The business part of the trip is claimable and the private part is not. A log captures that split naturally, because each trip is recorded with its purpose. A builder who decides at the end of the year what the business percentage was, without a trip-by-trip record, has no way of showing that the figure is reasonable.

Tools and equipment: immediate deduction or depreciation

Tools follow a different path. Small items bought for the work are generally deductible in the year they are bought, provided the threshold for immediate deduction applies. Larger items, such as a concrete saw, a compressor or a scaffold, are usually depreciated over their effective life, which is the period the Australian Taxation Office determines for the item. The threshold changes from time to time, so the detail for the year of purchase should be checked before the invoice is filed.

Tools bought for a specific job, or used only on site, are the simplest to support. Tools that are used for the business and also for a side project or a private job are the ones that need a split. The test is the same as for the vehicle: is the use connected to the business, and can the business show it? A builder who keeps a tool at home and uses it for the family’s projects should not claim it in full, however often it goes to the site. The split does not need to be precise, but it does need to be reasonable and written down.

Keep the tax invoice for every purchase. The record should show what was bought, from whom, when, for how much and what it was used for. A receipt that shows only a total and a store name is weak evidence, particularly for a tool that could also be used at home. For a purchase that is partly private, such as a laptop or a phone, the business use has to be estimated on a sensible basis, and that basis should be written down. A builder who uses a phone for client calls and personal calls should record how the split was reached, and apply it the same way each year.

Tool records are also evidence in other settings. A tool stolen from a site, or damaged in a job, needs to be shown as owned and used by the business. The same invoice and photograph that support a deduction can support that claim. Keep them in one place, and keep a copy somewhere other than the ute.

Digital tools that keep the records honest

Apps that log trips, scan receipts and link them to the bookkeeping system can make the records far easier to keep. They also create a second copy of the records, which is useful when a phone is lost. The risk is that the app becomes the only copy, or that the log is edited to look tidier than the trips really were. Choose tools that keep an audit trail of changes, export the data in a usable form and retain the original trip entries and receipt images. A record that can be shown to have changed is weaker than one that has not.

Privacy is the next question. A receipt, an invoice or a trip log often contains personal information about a client, a supplier or the builder. Before uploading any of that to a commercially available AI product, check how the product stores and uses the information. The Office of the Australian Information Commissioner’s guidance on privacy and commercially available AI products is the place to check the questions to ask. The article on bookkeeping systems for builders covers the wider choice of tools in more depth.

Retention deserves its own thought. Records have to be kept for the period the Australian Taxation Office requires, which runs beyond the year the claim is made. An app subscription that lapses, a phone that is replaced without a transfer, or a provider that closes its service can all leave a builder with a gap in the years that still matter. Export the records at each year end, store them somewhere the business controls, and check that the export opens without the app that created it.

A worked example: the ute that did the work and the school run

Consider a sole trader who runs a small renovation business from a ute and a trailer. The vehicle is used for jobs, supplier runs and, on a few afternoons a week, for the school run. The builder’s first year of records consisted of a folder of fuel receipts and a spreadsheet of totals, and the vehicle claim was the full cost of running it. The builder had assumed that because the ute was a work vehicle, every cost was deductible.

When the question came up, the builder had no way to split the business and private use. The records showed fuel and servicing costs, but no trip purpose and no odometer readings that would support a percentage. The builder started a log at the beginning of the next period, using a phone app that recorded the start and end of each trip with its purpose. The app was set to keep the original entries, so any edit would show as an edit. The first logged period gave a business percentage lower than the full cost, and the builder amended the approach accordingly.

The builder also sorted the tools. Each purchase was recorded with its invoice, its use and an estimate of the business share for anything used at home. Expensive equipment was listed for depreciation. The phone was split on a documented basis. The result was a smaller claim, but one that could be explained line by line, which is the outcome that matters when a question arrives.

The change also made the next conversation with an accountant much shorter. The records were ready before the appointment, the questions were specific, and each figure on the return could be traced back to a trip or an invoice. That is the real benefit of the work. It is not that the claim becomes larger, but that it becomes something the builder can stand behind without anxiety when it is reviewed.

What to check before you lodge the claim

Before the figures go into a return, check that each deduction has a business link, a record and a private-use split where one is needed. Check that the vehicle method is the one the records support, and that it has been applied consistently. Check that tools have been treated correctly, and that any item over the threshold has been depreciated rather than deducted in full. Check that home-to-work travel has not been claimed as if it were business travel.

The budget papers set out the Australian Government’s tax reform proposals for the year. Those proposals are announcements, and a change to deductions should be checked against the final law before it is relied on. Do not build a claim on an announcement that has not become law. The Australian Taxation Office publishes the guidance that applies once a change takes effect, and that guidance is the place to confirm what a deduction allows.

The habit that serves a builder best here is the same habit that serves a CPD record. Keep the evidence with the event, date it at the time, and keep a copy where the business can reach it. The PointCPD guide to how NSW builder CPD works explains what the evidence for CPD has to show, and a builder who keeps tidy tax records will find the same discipline carries across.

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Published 28 September 2026. General information for builders, not legal, financial or engineering advice for a specific job. Check current requirements with the relevant regulator or standard before relying on them.