Trades businesses — plumbers, electricians, builders, cleaners, carpenters — share a set of bookkeeping challenges that don't appear as neatly in other industries. Variable income, subcontractor chains, vehicle fleets, and equipment purchases all create complexity that needs careful handling from the start of the engagement, not cleaned up at year end.
Business Structure and Its Bookkeeping Consequences
Most small trades operate as sole traders or as companies (often a family trust is the shareholder). The structure matters for bookkeeping because it changes how owner drawings, wages, and superannuation are coded.
A sole trader cannot pay themselves a wage — any money the owner takes is a drawing, which sits in the equity section, not as a P&L expense. Superannuation is not compulsory for sole traders paying themselves, but they can make personal super contributions and claim a deduction under s290-150 of ITAA 1997. If you're coding owner super as a business expense without a notice of intent to claim (which is a personal tax issue), you're creating a problem for the tax agent.
A company-structured trades business pays the working director a wage, withholds PAYG, and pays super at the Superannuation Guarantee rate (currently 11.5% for FY2026, rising to 12% from 1 July 2026). Code wages to an employee expense account and super to a separate super expense account — never lump them together.
Materials vs Labour in Job Costing
Trades invoices typically blend materials and labour. The split matters for several reasons: it affects gross margin analysis, and some clients ask for it separately (especially in construction where retentions apply to labour-only portions of contracts).
Set up your chart of accounts to separately track cost of materials purchased (a direct cost) and subcontractor labour (also a direct cost, but with TPAR implications — see below). If the business bills clients at a fixed price, the materials/labour split is internal. If they bill on a cost-plus basis, the split hits the sales invoice and affects what you report.
For job costing, use job/project tracking codes within your accounting software. Each job gets a code. Materials purchased for that job — coded to the job. Subcontractor invoices for that job — coded to the job. At month end you can run a job profitability report and identify any jobs running over budget before they become write-offs.
GST applies to both materials and labour in most trades work (standard-rated supply). The only exception worth flagging is where a sole trader plumber or electrician does residential work and happens to supply something that could be separately classified — in practice, nearly all trades supplies are taxable. Make sure invoice templates show GST at 10% on both line items.
Motor Vehicles: Logbook vs Cents Per Kilometre
Motor vehicle expenses are one of the most mishandled areas in trades bookkeeping. The ATO applies different rules depending on whether the vehicle is a car (as defined — a motor vehicle designed to carry fewer than 9 passengers and a load of less than 1 tonne) or a commercial vehicle.
For commercial vehicles (utes, vans, trucks over 1 tonne payload), the business-use deduction is based on actual business use. If a plumber's ute is used 90% for work and 10% for personal use, 90% of running costs are deductible. The business needs records — fuel receipts, service records, registration — but a full ATO logbook is not required for vehicles that are not "cars" under the definition.
For cars (the minority in trades, but some owners drive SUVs or sedans), the two methods are:
Logbook method: The owner keeps a continuous logbook for a minimum 12-week period representing typical use, establishing a business-use percentage. That percentage applies to all car expenses — fuel, insurance, rego, loan interest, depreciation. The logbook is valid for 5 years unless usage patterns change materially. Code 100% of car expenses to a suspense account, then journal the personal-use portion to drawings (sole trader) or a loan account (company) at year end.
Cents per kilometre method: For FY2026, the rate is 88 cents per km (ATO updates this annually — verify at lodgement time). Maximum 5,000 km per year. The simplicity is appealing for low-use vehicles but it caps the deduction at $4,400, which is less than most trades vehicles actually cost to run. The bookkeeper's role here is to record the km claims the client submits and ensure the substantiation is reasonable.
TPAR: Taxable Payments Annual Report
If the trades business pays subcontractors for work in building and construction, cleaning, courier/road freight, information technology, or security services, it must lodge a Taxable Payments Annual Report (TPAR) by 28 August each year for the prior financial year.
TPAR reports the total gross amount paid to each subcontractor, their ABN, and their name. It is lodged with the ATO via the business portal or through a tax agent. The ATO uses TPAR data to cross-match against individual and company tax returns — discrepancies trigger review letters.
Your bookkeeping setup needs to capture this data through the year, not scramble for it in August. Flag all subcontractor suppliers with a specific supplier type in your chart of contacts. When coding invoices from those suppliers, use a dedicated expense code (e.g., "Subcontractor Labour — Building") rather than mixing them into general labour or materials. At TPAR time, run a supplier payment summary filtered by that code. Cross-check ABNs via the ABN Lookup tool before lodging — a missing or wrong ABN creates an ATO matching failure.
Retentions in construction contracts add a wrinkle: the TPAR reports amounts paid in the financial year, not amounts invoiced. If the business holds a 5% retention on a subcontractor's invoice and pays it in the following year, it goes into that following year's TPAR. Track retained amounts in a liability account (e.g., "Retentions Payable") and only include payments actually released during the year in the TPAR figure.
Instant Asset Write-Off for Tools and Equipment
Under the instant asset write-off rules available to small businesses (aggregated turnover under $10 million for FY2026), eligible depreciating assets used for business purposes can be fully deducted in the year of first use, up to the applicable threshold. For FY2026, confirm the current threshold with the ATO — it has changed several times in recent years and the temporary full expensing measures have wound back.
For trades, this covers tools (drills, saws, testing equipment), trailers, scaffolding, and plant bought for jobsite use. It does not cover stock (materials held for sale) or assets used predominantly for private purposes.
The bookkeeping entry is straightforward: debit an asset account at purchase cost, then at year end (or immediately if using small business simplified depreciation) write off the full cost via a depreciation expense journal. Do not leave tools under $1,000 sitting in fixed assets with a 5-year depreciation schedule — they're eligible for immediate write-off and should be treated as such.
GST credits on tools and equipment: full GST credit available in the BAS period the invoice is received (cash-basis entity) or the tax point is established (accruals). Trades businesses on cash accounting for GST claim the credit when the supplier is paid; accruals entities claim it on invoice. This matters if the equipment supplier issues an invoice in June but the business doesn't pay until July — the GST credit period shifts by a full quarter for quarterly BAS lodgers.
Managing Variable Income Cash Flow
Trades income is lumpy. A builder might invoice nothing for three weeks then land a $150,000 payment. Bookkeepers serving trades clients need to build a simple cash flow forecast — even a 13-week rolling forecast in a spreadsheet — so the client isn't blindsided by a GST or PAYG instalment payment due when the work pipeline is quiet.
Instalment activity statements (IAS) for PAYG withheld need to be lodged monthly if the business withholds more than $25,000 per year, quarterly if less. Miss a lodgement and ATO charges a failure-to-lodge penalty. Set calendar reminders for every client and treat lodgement dates as non-negotiable deadlines, not aspirational targets.