Bought tools for work this financial year?
You may be able to claim some or all of the cost on your tax return. But the answer depends on whether you’re an employee or running a business, how much the tool cost, and how you use it.
There is also an important change for the 2026–27 financial year: eligible Australian tax residents with assessable labour income can now access a standard deduction of up to $1,000 for work-related expenses.
So, can you claim tools on tax?
Yes, in many cases. But the rules aren’t the same for everyone.
Here’s what you need to know.
Can Employees Claim Tools on Tax?
Yes.
If you’re an employee and you pay for tools or equipment that you need to do your job, the expense may be deductible provided it is connected to earning your employment income and isn’t reimbursed by your employer.
The tax treatment then depends largely on the cost of the item.
Tools costing $300 or less
A qualifying depreciating asset costing $300 or less may be immediately deductible where the relevant conditions are met, including that you use it mainly to produce assessable income and it isn’t part of a set or group of assets that falls outside the immediate-deduction rules.
For example, an electrician buys a $240 specialised hand tool and uses it entirely for work.
Under the ordinary employee deduction rules, the full $240 may be deductible in the year it is purchased.
Tools costing more than $300
A tool costing more than $300 will generally need to be treated as a depreciating asset rather than simply deducted in full upfront.
That means you generally claim its decline in value over time, based on the applicable depreciation rules and effective life.
For example, if you buy a $1,500 tool and use it entirely for work, you generally don’t just claim the entire $1,500 in the year you buy it.
The Big Change for 2026–27: The $1,000 Standard Deduction
This is one of the biggest changes employees need to know about this financial year.
From 1 July 2026, eligible Australian tax residents who earn assessable labour income can claim a standard deduction of up to $1,000 for work-related expenses.
The idea is to make tax time simpler for people with relatively modest work-related expenses.
There is an important detail, though.
The standard deduction is not a $1,000 tax refund.
It is a deduction of up to $1,000 from taxable income. So the actual tax saving depends on your tax rate.
For example, a $1,000 deduction does not mean the ATO gives you $1,000 back.
It reduces your taxable income by up to $1,000.
The new rules also replace the old $300 no-receipt threshold, so older articles telling workers that “tools under $300 don’t need receipts” should not simply be copied into a 2026–27 guide.
Where your actual work-related expenses are higher than $1,000, the ordinary deduction rules continue to matter.
What If You’re a Sole Trader or Business Owner?
This is where things get different.
A sole trader isn’t claiming tools as an employee work-related expense. The tools are generally being purchased for the business, so the business depreciation and capital allowance rules need to be considered.
The new $1,000 standard deduction does not replace the ordinary business deduction rules for people earning income from business or self-employment activities.
For example, a sole-trader electrician buying $5,000 of business equipment needs to consider the business asset rules rather than simply applying the employee $300 rule.
You can also use our Sole Trader Tax Calculator to see how deductible business expenses can affect your taxable profit.
What About the $20,000 Instant Asset Write-Off in 2026–27?
This is one area where you need to be careful with online tax information.
The Federal Government announced in the 2026–27 Budget that it would make the $20,000 instant asset write-off permanent from 1 July 2026 for eligible small businesses with aggregated turnover below $10 million.
However, the legislation implementing that permanent extension is still before Parliament as at 18 August 2026.
So we would not tell a business owner:
“Every tool under $20,000 can definitely be written off right now.”
The government has announced the measure, but the final tax treatment needs to be checked against the legislation in force when the asset is acquired and first used.
For a significant equipment purchase, it is worth checking the current position before you lodge your return.
Our Business Asset Depreciation Calculator can also help you model the potential deduction.
What Tools Can You Claim on Tax?
Depending on your job and circumstances, potentially deductible tools and equipment can include:
- Hand tools and power tools
- Diagnostic and testing equipment
- Measuring equipment
- Laptops and tablets used for work
- Laser levels and specialist equipment
- Toolboxes and work storage equipment
- Machinery used in the business
- Repairs and maintenance of work equipment.
The important point is that calling something a tool doesn’t automatically make it deductible.
The expense needs to have the required connection with earning taxable income.
What About Safety Boots and Protective Equipment?
Safety equipment can be deductible where it meets the relevant tax requirements.
For tradies and site workers, this can include items such as:
- Safety boots
- Hi-vis clothing
- Safety glasses
- Hearing protection
- Protective clothing
- Other job-specific protective equipment.
But ordinary clothing is different.
A normal pair of trousers or shoes doesn’t become tax deductible simply because you wear them to work.
We’ve covered this in more detail in our Work Clothes Tax Deduction guide.
What If You Use Your Tools for Both Work and Private Projects?
This is one of the most common mistakes.
If you use a tool for both work and private purposes, you generally can’t claim the entire cost as a work-related deduction.
For example, suppose you buy a $2,000 specialised tool.
You use it: 80% for work and 20% for private projects.
Your deduction generally needs to reflect the work-related portion rather than automatically claiming 100%.
The same principle applies to equipment used partly for a business and partly for private purposes.
Keep reasonable records showing how you calculated the business or work-related percentage.
What Records Should You Keep?
Even though the new $1,000 standard deduction simplifies some employee claims, good record keeping is still important.
For ordinary deductions, keep evidence showing:
- What you bought
- When you bought it
- How much it cost
- What it was used for
- Your work or business-use percentage
- How you calculated depreciation where applicable.
Don’t rely on a bank statement alone when you need evidence of what was actually purchased.
A receipt or tax invoice is much stronger evidence.
For business assets, keep the records needed to support the asset’s cost, date of purchase, date it was first used or installed ready for use, and depreciation treatment.
Three Simple Examples
Example 1: $250 work tool
You are an employee and buy a $250 tool that you use mainly for your job.
The ordinary $300 immediate-deduction rules may allow the cost to be claimed in the year of purchase, subject to the conditions.
For 2026–27, you should also consider how the new standard deduction applies to your overall work-related expenses.
Example 2: $1,500 specialised tool
You are an employee and purchase a $1,500 tool that you use entirely for work.
Because the cost is above $300, you would generally look at the decline-in-value rules rather than claiming the full $1,500 immediately.
Example 3: $8,000 business equipment
You operate a sole-trader business and purchase $8,000 of equipment.
The employee rules don’t apply.
You need to consider the business depreciation and capital allowance rules, including any current concessions or instant asset write-off measures available to the business.
5 Common Mistakes to Avoid
1. Assuming every tool is immediately deductible: The cost of the asset and the rules applying to your situation matter.
2. Claiming private use as business use: If you use equipment privately, you may need to apportion the deduction.
3. Using the employee rules for a business: A sole trader or company may have very different depreciation and capital allowance rules.
4. Assuming the $20,000 write-off is automatically available: The government has announced a permanent $20,000 measure, but as at 18 August 2026 the enabling legislation remains before Parliament.
5. Forgetting the rest of your deductions: Tools are only one part of your tax position.
For many tradies and business owners, vehicles, insurance, work-related clothing, phone expenses, bookkeeping, travel and other business costs can also matter.
Don’t Leave Legitimate Deductions Behind
Buying tools for work can be a genuine tax deduction. The difficult part is knowing which rule applies to you.
An employee buying a $200 hand tool, a tradie buying a $1,500 specialised tool, and a sole trader investing thousands in new equipment may all receive different tax treatment.
And with the new 2026–27 work-related deduction rules and changes to the small-business instant asset write-off, older articles aren’t always telling the full story.
KSH TAX helps tradies, sole traders and small businesses understand what they can legitimately claim and how those deductions fit into their wider tax position.
Need help with your deductions? Talk to KSH TAX or call us on 08 6285 8110.
