Do plumbers need to formally account for van stock as inventory?

If materials are purchased for immediate use on a specific job and consumed quickly, most small plumbing businesses expense them directly to cost of goods sold as purchased, rather than running a formal perpetual inventory system. However, businesses carrying meaningful value in van stock or a stocked workshop, fittings, hot water units, valves bought in bulk, should conduct at least an annual stocktake so trading stock is accurately reflected under Division 70 of the ITAA 1997, since a material difference between opening and closing stock affects taxable income.

How does trading stock affect a plumbing business's taxable income?

Under Division 70 ITAA 1997, the value of trading stock on hand at the start and end of the income year is factored into assessable income. If closing stock value exceeds opening stock value, the difference is included in assessable income; if it's lower, it's an allowable deduction. This means a plumbing business holding significant unused materials at 30 June needs an accurate stocktake, not a guess, to get the right tax outcome.

Should materials be job-costed or expensed generally?

For accurate job profitability, materials should be allocated to the specific job in Xero using tracking categories or a job costing add-on, not lumped into a general materials expense account. This is the only way to see whether a job's margin held up once materials are factored in, rather than discovering at year-end that materials costs across all jobs were higher than expected without knowing which jobs were the problem.

Can GST credits be claimed on materials bought on a trade account?

Yes, provided you hold a valid tax invoice from the supplier (Reece, Tradelink, etc.) showing their ABN and the GST component. Trade account statements alone are not sufficient substantiation, the underlying tax invoices for each purchase should be retained, ideally captured digitally at time of purchase via a receipt-capture tool synced to Xero.

What's the best way to reduce wastage and lost materials cost?

Regular stocktakes (monthly for high-value stock, at minimum annually for tax purposes), job-costing every material purchase against the job it was bought for, and reconciling trade account statements against actual bills received are the core controls. Materials that can't be traced to a specific job or a stock count are effectively unaccounted shrinkage, a red flag worth investigating rather than writing off as a rounding error.

Materials, Stock & Inventory Bookkeeping for Plumbers

Published July 2026By True Tally Bookkeeping7 min read

Materials Are Usually the Second-Biggest Cost After Labour, and the Least Tracked

Copper, PVC, fittings, hot water units, valves, for most Melbourne plumbing businesses, materials sit somewhere between 20% and 40% of job revenue, depending on the job mix between labour-heavy service calls and materials-heavy installs. Yet materials bookkeeping is often the loosest part of the whole system: purchases go through a trade account, get paid in bulk at the end of the month, and never get traced back to the specific job they were bought for. The result is a business that knows its total materials spend but has no idea which jobs were actually profitable once materials are properly allocated.

Trading Stock Rules: When You Actually Need a Stocktake

Under Division 70 of the Income Tax Assessment Act 1997, trading stock on hand at the start and end of the income year affects your taxable income. If the value of stock on hand at 30 June is higher than at the start of the year, that increase is included in assessable income. If it's lower, it's a deduction. For a plumber who buys materials for immediate use on specific jobs and carries minimal stock, this is a non-issue, most of what's bought gets used within days or weeks.

But plumbing businesses that carry meaningful stock, a stocked van, a small warehouse of fittings bought in bulk to get trade pricing, hot water units bought ahead of a busy season, need at least an annual stocktake to value that stock accurately. Guessing at 30 June, or simply not counting at all, risks getting the tax treatment wrong in either direction.

Not sure if you're carrying enough stock to need a formal stocktake?

We review your materials purchasing pattern and set up the right level of tracking, from simple job-costing to a full stocktake process, based on how your business actually operates.

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Job Costing Materials Properly in Xero

The single biggest improvement most Melbourne plumbing businesses can make is allocating every material purchase to the job it was bought for, using Xero's tracking categories or a job management add-on (ServiceM8, simPRO, Fergus). Done consistently, this shows:

True gross margin per job, materials included
Which job types (bathroom renos, hot water replacements, commercial fit-outs) carry the best materials-to-revenue ratio
Whether quotes are systematically underestimating materials cost
Materials wastage, purchases that can't be traced to any completed job

Without this, materials spend is just a lump-sum number on the P&L that tells you nothing about which jobs are actually making money.

GST Credits on Trade Account Purchases

Trade accounts with suppliers like Reece, Tradelink or local plumbing merchants make ordering fast, but the monthly statement isn't itself sufficient substantiation for a GST credit claim, you need the underlying tax invoices for each purchase, showing the supplier's ABN and GST component. Photographing receipts at the point of purchase using a tool like Dext or Xero's own receipt capture, synced automatically, avoids the end-of-month scramble to track down missing invoices for a trade account statement that doesn't itemise GST clearly enough on its own.

Controlling Wastage and Shrinkage

Materials that can't be traced to a specific job or accounted for in a stock count are effectively shrinkage, whether from wastage, theft, or simply materials bought for a job that never eventuated. The controls that catch this:

Job-cost every purchase, no exceptions, even for small trade account top-ups
Regular stocktakes, monthly for high-value stock, annually at minimum for tax purposes
Reconcile trade account statements against actual bills, not just the total, line by line
Review materials-to-revenue ratio monthly, a sudden jump flags either a pricing problem or a control problem

KPIs to Track

Materials as a percentage of job revenue, by job type, not just as a business-wide average
Stock turnover, how quickly van/warehouse stock is used relative to what's held
Unallocated materials spend, the shrinkage indicator
Quote-to-actual materials variance, are quotes systematically underestimating what a job actually costs?

True Tally Bookkeeping, Melbourne

We help Melbourne plumbing businesses set up job costing and materials tracking that actually shows job-level profitability, not just a lump-sum materials expense at year end.