The Engineer's Financial Blueprint: Deductions Built Easy

Welcome, to the Podcast! Our newsletter made easy! Please note, this podcast features AI-generated voices for your hosts, Mia Taylor and Leo Baker, bringing you expert insights from owner, Ben De Rosa, at Aevum Accounting. Each week, we're here to help you confidently navigate the ins and outs of Australian tax – whether it's for your individual finances, or the complexities of your business. We'll cut through the jargon to give you strategies for compliance, smart planning, and that ultimate peace of mind. So, if you're looking to understand your obligations, maximize your financial position, or simply gain clarity on your money matters, you're in the right place. Let's get started with our review of the week! Michael Ings said "Experienced, knowledgeable, and professional! I would highly recommend Ben and his team to anyone looking for a solid accountant." Thank you for the amazing feedback Michael! We love hearing from our clients and a positive review gets our podcast started on the right foot. And we are back! Leo Baker here, and today on our series for specific professions, we are talking about the brilliant minds who design and build our world: our engineers! That’s right, Leo. It’s an incredibly diverse profession, from civil engineers on massive construction sites to software engineers in an office, and their tax deductions are just as varied. So today, we’re drafting the financial blueprint for engineers. I love it. Where do we lay the foundations? We always begin with the non-negotiable foundation for any claim: the ATO’s Three Golden Rules. First, you must have spent the money yourself and were not reimbursed. Second, the expense must directly relate to you earning your income. And third, you must have a record, like a receipt, to prove it. Simple enough! Okay, let’s get on the road. What are the rules around car expenses for an engineer who might be splitting time between the office and a job site? This is a key area. You generally can't claim the cost of your normal trip from home to the office. However, you can claim travel when you drive from your main office to an alternative workplace, like a construction site. You can also claim travel if you drive directly from home to that alternative workplace. So, if your office is in the CBD, but you have to be on a site in Mandurah for the day, the trip from your home to Mandurah is claimable. This is also really important for engineers who don't have a fixed workplace. If you have 'shifting places of employment' and you’re constantly travelling from one work site to another all day, those trips are deductible. Okay, but here’s a question. A lot of engineers drive a ute. Does that change anything? That is a fantastic question and a crucial point of difference. The type of vehicle you drive completely changes how you claim. If you use a standard car, you can use either the simple cents per kilometre method or the logbook method to calculate your claim. The cents per kilometre method for the 2025 financial year is 88 cents per kilometre for a maximum of 5,000 work-related kilometres. But, and this is the important part, if you use a vehicle with a carrying capacity of one tonne or more, like many utes, you cannot use those methods. So you can’t use the simple methods for your big work ute? What do you do instead? For those heavy vehicles, you claim the actual costs you incur for the work-related use of the vehicle. This means you need to keep records of all your running costs – fuel, insurance, servicing – and then work out the percentage of that cost that was for business use, usually with a logbook. Right, so big ute, more paperwork! What about engineers working from home, drawing up plans? If you work from home, you can claim your additional running expenses. The easiest way is using the ATO’s fixed-rate method, which for the 2025 financial year is 70 cents an hour. This rate is a package deal that covers your internet, phone, stationery, and energy costs. And what if I’ve got a massive, multi-screen computer setup for my cad software that costs a fortune? Is that included in the 70 cents? No, and that’s the great part. You can still make a separate claim for the decline in value, or depreciation, of your work-related equipment like computers, printers, and office furniture. Just remember, for the fixed-rate method, you must keep a record of the total number of hours you worked from home for the entire income year – a four-week representative diary won’t be enough. Can I claim the coffee and tea that fuels my late-night design sessions? Sorry, Leo. The ATO says you can't claim general household items like coffee, tea, and milk. A shame. Okay, let’s talk about the engineer's work wardrobe. Is it all hi-vis vests and hard hats? When it comes to deductions, yes. You generally cannot claim the cost of conventional clothing, like business shirts or trousers, even if your employer requires you to wear them. The claim is for clothing that is genuinely protective. This means it has special features to protect you from injury at work, so think steel-capped boots, gloves, and hi-vis vests. And don't forget, if you're washing that protective gear, you can claim up to $150 in laundry expenses without written receipts. So safety first, fashion second. Makes sense. What about keeping the brain sharp with self-education? You can claim expenses for a course that directly relates to your current engineering role, as long as it maintains or improves your skills, or is likely to help you get a pay rise in your current job. A great example is doing a Master's degree or attending a conference in your specific field. So, a civil engineer doing a Master's in structural integrity, that's a yes. But if they do a course on interior design because they're sick of looking at concrete, that's a definite no? That is a perfect summary. It has to be connected to what you do now, not what you want to do in a different career. And an important note: you cannot claim a deduction for your Hecs-Help repayments. However, you may be able to claim the costs of a non-commonwealth supported course on Fee-Help. That's a huge clarification. What other things should be in an engineer's deduction toolkit? Great question. You can claim your union or professional association fees, like your membership with Engineers Australia. You can also claim the cost of renewing any specific licences or certificates you need for your job, but not the cost of getting the initial one. And for those engineers who spend time on site, don't forget sun protection! You can claim the cost of sunglasses, sunhats, and sunscreen if you're required to work in the sun. So we've covered the general rules, but you mentioned at the start that engineering is incredibly diverse. Do the deductions change much between, say, a civil engineer on a dusty worksite and a software engineer in a slick city office? That's the perfect question, because while the *principles* are the same, the *application* of those rules can look completely different. Let's break it down for a few disciplines. For a **Civil or Structural Engineer**, the focus is heavily on site-based work. So their biggest claims, after their vehicle, will be for protective clothing and equipment. We’re talking high-quality steel-capped boots, hard hats, safety glasses, and gloves. They might also claim specific tools like laser measures or specialized surveying equipment. So, things that protect you from the elements and help you measure big things. What about a Mechanical Engineer? For a **Mechanical Engineer**, it might be a mix of site and workshop. So they'll have the protective gear, but also a bigger focus on specialized tools and equipment. Think high-end diagnostic tools, calipers, or even the depreciation on larger pieces of equipment they own. And if they do a lot of design work, their claim for high-performance computer equipment to run complex simulation software could be significant. And an Electrical Engineer? For an **Electrical Engineer**, it’s all about diagnostic and safety equipment. They would be claiming things like multimeters, oscilloscopes, and other testing devices. Plus, the renewal of any specific electrical licenses or certifications they are required to hold is a key deduction. And again, specialized software for circuit design would be a big one. Okay, so that covers the engineers dealing with the physical world. What about the ones who build our digital world? The Software Engineers? Their claims look completely different. For a **Software Engineer**, the home office is their primary deduction area. We're talking about high-performance computers, multiple monitors, ergonomic chairs, and keyboards. Their self-education claims are often for online courses or subscriptions to learning platforms. And they can claim subscriptions to cloud services like Amazon Web Services or Azure if they use them for work or upskilling. Attending developer conferences, either in person or virtually, is another huge and common deduction. It really shows that you need to think about your specific, day-to-day tasks. Now, Mia, we've been talking a lot about employee deductions, but I know many engineers work as independent contractors. Is their tax situation completely different? Leo, it is a whole different ball game. The moment you step from being an employee to being a contractor operating your own business, the entire landscape changes. How so? Do you get to claim more? Generally, yes. A contractor can claim a much wider range of business running expenses. Things that are completely off-limits for an employee are suddenly on the table. For example, a contractor can claim the costs of their business registration, their professional indemnity and public liability insurance, subscriptions to accounting software like Xero, and even a portion of their home office occupancy costs. Hang on, 'occupancy costs'? What does that mean? For an employee, a home office claim is limited to running costs – the extra power and internet you use. But for a contractor who uses their home as their primary place of business, they can often claim a portion of their occupancy costs, like the interest on their mortgage, their rent, council rates, and home insurance. It's a massive difference. Wow. So what's the catch? It sounds almost too good. The 'catch' is that you take on all the responsibilities of a business owner. There are three huge differences. The first is **GST**. If your turnover as a contractor is over $75,000 a year, you must register for GST. That means adding 10% to your invoices and paying it to the ATO, but it also means you can claim back the GST on your business purchases. Okay, so you become a tax collector for the government. What’s number two? Superannuation. This is the big one for long-term wealth. As an employee, your employer has to pay super for you. As a contractor, no one is doing that for you. You are responsible for putting money aside and paying it into your own super fund. It is absolutely critical that contractors manage this themselves. So you have to be your own HR and super department. What's the third big difference? Tax payments. As an employee, tax is withheld from your pay each week or fortnight. As a contractor, you get paid your full invoice amount, and you are responsible for putting aside the tax yourself. Usually, this means entering the PAYG Instalment system and paying your estimated tax to the ATO every quarter. It requires serious cash flow discipline. And to add one more layer of complexity, many engineering contractors fall under what's called the Personal Services Income, or PSI rules. In short, if your income is mainly a reward for your personal skills and effort, the ATO can limit the types of deductions you can claim, bringing them more in line with what an employee could claim anyway. It's a complex area designed to stop people from posing as contractors just to get a tax advantage. So being a contractor offers more flexibility and potentially more deductions, but with a massive increase in administrative responsibility. That's the perfect summary. It's a significant structural decision that has major implications for your tax, your super, and your cash flow. It really does sound like you need a blueprint before you start! Okay, let's touch on our final area: salary packaging. Yes, and for engineers, this can vary dramatically depending on where you work. The most common and powerful option for many engineers in the private sector is a novated car lease. In simple terms, it’s a three-way agreement between you, your employer, and a finance company. You bundle your car's finance payments and all its running costs into a single payment from your salary. And I know from our previous episodes that the new rules for Electric Vehicles make this an even better deal now. Exactly. The Fringe Benefits Tax exemption for eligible EVs can make a novated lease an incredibly powerful tax-saving tool. But, as we always say, you must be aware of the "Reportable Fringe Benefit Amount". Even with an FBT-exempt EV, the benefit is reported on your income statement and can significantly increase your compulsory Help debt repayments. It really sounds like the tax rules for engineers are as detailed and specific as one of their own blueprints. That’s a great way to put it. The nuances between disciplines, between being an employee and a contractor, and the details of salary packaging can make a huge difference to your tax outcome. Getting that structure right is key. And that's where we come in. At Aevum Accounting, we provide that tailored advice. We understand the specific deductions available to engineers across all disciplines. We can help you navigate the complexities of contracting, set up your logbook, and understand the real impact of any salary package you’re offered. It's about helping you build a solid financial structure, so you can focus on building everything else! A perfect place to end. And that brings us to the end of another episode! We hope today's discussion has provided you with valuable insights and helps you navigate your financial world with greater confidence. Before we go, a quick but important reminder: The information and strategies shared on this podcast are for general informational purposes only and do not constitute specific tax or financial advice. Everyone's situation is unique, and tax laws are complex and constantly evolving. For personalized advice tailored to your specific individual or business needs, we always recommend consulting with a qualified professional. You can connect with our team at Aevum Accounting – visit our website to learn more about our services, including detailed tax guides for various occupations, and how we can support your financial journey. Thank you so much for tuning in! If you enjoyed this episode, please consider subscribing, leaving us a review, and sharing it with anyone who might benefit. Your support helps us reach more Australians. Until next time, stay savvy, stay proactive, and keep building your financial future! From all of us at Aevum Accounting, goodbye for now!