Industry-Specific Tax Strategies: Trades, Consulting and Retail Compared

A tradie claiming vehicle costs, a consultant working from a spare room, and a café owner reconciling the till are all doing "tax planning", but the rules that apply to each are genuinely different. Generic advice to maximise deductions and get the structure right skips over what actually determines whether a claim holds up: how a contractor is classified, whether a home office deduction is safe to claim, and how trading stock is valued at year end. Here is what changes across three common small business types: trades and contracting, professional consulting, and retail or hospitality.

Trades and Contracting: Vehicles, Tools and Worker Classification

For a sole trader or partnership running a trade business, motor vehicle deductions come down to two methods. The cents per kilometre method is 88 cents per kilometre for 2025-26, capped at 5,000 business kilometres per car ($4,400 maximum), and it's only available to sole traders and partnerships with an individual partner, not companies. Beyond that cap, the logbook method (a 12-week logbook plus odometer records) claims the actual business-use percentage of running costs instead. Tools and equipment can generally be written off immediately under the instant asset write-off, currently $20,000 per asset for 2025-26 for businesses turning over under $10 million.

The bigger risk for trades businesses is worker classification. Since the High Court's 2022 decisions in CFMMEU v Personnel Contracting and ZG Operations v Jamsek, the ATO works out whether a worker is an employee or a contractor primarily from the written contract's terms, not job titles, invoicing or whether the worker holds an ABN. Getting it wrong exposes a business to backdated PAYG withholding. Superannuation adds another layer: even a genuine contractor can still be owed super guarantee, currently 12% of ordinary time earnings, if the contract is wholly or principally for their labour and they cannot delegate the work. Apprentices, trainees, labourers and trade assistants are always employees, never contractors.

Professional Consulting and Service Businesses: Home Office and PSI

Consultants working from home have two categories of deduction available. Running expenses, such as electricity, internet and phone, can be claimed under the fixed rate method, currently 70 cents per hour for 2025-26, provided you keep a full-year record of actual hours worked; estimates aren't accepted. Occupancy expenses, such as rent, mortgage interest and rates, can only be claimed where part of the home is set aside as a dedicated place of business, and doing so has a consequence that's easy to miss: it can partially forfeit the CGT main residence exemption when the property is eventually sold, in proportion to the floor area and period used for business.

The other consideration unique to consultants is personal services income (PSI): income that is mainly a reward for an individual's own skills, labour or effort, meaning more than 50% of what's paid under a contract. Where PSI rules apply, income is attributed to the individual and deductions are limited to what an employee could claim, ruling out income-splitting and most occupancy-expense claims. Whether a consultancy instead qualifies as a personal services business, and sits outside those limits, is worked out under the PSI tests: the results test, or, where less than 80% of PSI comes from one client, self-assessment against the unrelated clients test (income from two or more clients gained via offers made to the public), the employment test (others perform at least 20% of the principal work by market value), or the business premises test. Where 80% or more of PSI comes from one client, self-assessment isn't available and the business must apply to the ATO for a personal services business determination.

Retail and Hospitality: Stock Valuation and Cash Records

Retail and hospitality businesses carry two obligations trades and consultancies don't: trading stock and cash handling. At year end, stock can be valued at cost, market selling value or replacement value, and a different method can be chosen for different stock items each year, useful where some lines have devalued and others haven't. Small businesses can skip a formal stocktake under the simplified trading stock rules if the estimated change in stock value across the year is $5,000 or less.

Cash handling record-keeping matters more here because the ATO's compliance program specifically targets cash-heavy hospitality and retail businesses, cross-checking reported income against small business benchmarks for the industry and turnover bracket. A till or POS system reconciled daily against banked takings, with end-of-day summary records kept alongside GST records for five years, is the baseline expectation, not a nice-to-have.

Getting the Detail Right

The common thread: customised tax planning only means something once it accounts for how a business actually earns its income, trading labour and materials, billing for professional time, or moving stock and cash across a counter. At Finance & Tax Consultants, we work through these industry-specific rules with clients rather than applying a generic checklist. If you're unsure which applies to your business, our business advisory team can help.

Disclaimer: This article contains general information only and does not constitute financial, legal or tax advice. It has been prepared without regard to your objectives, financial situation or needs. Tax and superannuation laws change frequently, and the information in this article may not reflect the current law or may become inaccurate over time. Before acting on anything in this article, you should consider its appropriateness to your circumstances and seek advice from a registered tax agent or qualified adviser.