Lodging Tax Returns and Tax Deductions for Contract Cleaners – We Answer Some Common Questions
The end of the financial year in Australia is fast approaching. For contract cleaners and cleaning businesses, this means lodging a tax return for the financial year. Whether you choose to lodge your own tax return or use a tax agent, it’s important to get your records in order.
In this article, we answer some common questions in relation to lodging a tax return.
*** Please note that the advice provided below is general in nature, and readers need to consult a registered tax agent for personal or specific tax advice ***
What tax deductions are available to cleaning businesses?
Like all registered businesses in Australia, cleaning businesses are entitled to claim business expenses and depreciate capital assets. On 12 March 2020 (in the wake of COVID-19), the Australian Government announced changes to the way in which capital assets can be depreciated. To find out more about the depreciation changes, please click here.
The following items are generally tax-deductible or depreciable for cleaning businesses:
- Cleaning chemicals
- Cleaning implements, such as mops, buckets, wringers, wipes, sponges and cloths
- Staff wages and superannuation payments
- Automated cleaning equipment, such as vacuum cleaners, floor polishers, pressure cleaners and floor scrubbers
- Protective clothing, footwear and equipment for staff
- Commercial vehicles
- Insurances (various) and utilities (phone, Internet, electricity, etc)
- Rent on commercial premises
- Interest on business borrowings
- Marketing and advertising costs
What tax deductions are available to cleaning employees and independent cleaning contractors for commercial cleaning equipment?
Cleaning equipment is essential to be able to do your job as a cleaner. You can generally claim the cost of purchase for floor scrubbers, sweepers, steamers, vacuums, sprayers, polishers, rotary machines and more – they can all be listed as tax deductions for cleaners, as long as you paid for it yourself and it’s directly needed for your cleaning work.
What tax deductions are available to cleaning employees and independent cleaning contractors for consumable items or general cleaning supplies?
The ATO has some rules when it comes to work-related tax deductions for employees and independent cleaning contractors:
- “You must have spent the money yourself and weren't reimbursed.”
- “It must be directly related to earning your income.”
- “You must have a record to prove it (usually a receipt).”
Source: ATO website
The costs of more disposable or fast turnover items like cloths, mops, buckets and dusters can all be added to your tax return as cleaner tax deductions in the tools and equipment section. This includes pieces of consumable items you use to make transporting your materials easier.
If your deductions exceed $300 in total, you must be able to substantiate your overall claim; in other words, have receipts, tax invoices and detailed bank statements to show the ATO (if required).
Examples of cleaning equipment that are tax deductable under $300:
- Cleaning chemicals
- Wipes, sponges, scourers, cloths, applicators and dusters
- Garbage bags
- Cutters and scrapers
- Mops, buckets and wringers
- Brooms and brushes
- Carpet cleaning accessories
- Small cleaning machines
- Trolleys and carriers
- Specialised protective clothing and footwear, as well as safety equipment
Am I eligible as a contract cleaner for the $30,000 instant asset tax write off?
With the current $30,000 instant write off still available, small businesses and cleaning businesses can claim items costing up to $30,000 as a tax deduction. Talk to your tax agent or see here for more information on the ATO website
Some examples of what you can claim as an instant asset tax write off in your business:
- Commercial pressure washers
- Commercial Vacuum cleaners
- Commercial Floor polishing machines
- Commercial Floor scrubbers
- Commercial Floor sweepers
- Commercial Carpet cleaners
- Commercial Escalator cleaners
Do I need to lodge a tax return?
As a general rule, cleaners do need to lodge a tax return. In some instances, lodging a tax return is not required by the Australian Tax Office (ATO); however, you’ll need to submit a non-lodgement advice (NLA) with the ATO instead. If you’re unsure about whether you need to lodge a tax return, either speak with a registered tax agent or use the ATO’s lodgement determination tool.
How do I lodge a tax return?
A large number of cleaners and cleaning businesses lodge their tax returns online (via myTax on the myGov portal) or through a registered tax agent. The ATO still accepts paper returns, but the turnaround for tax refunds can be up to 50 business days (10 weeks).
For further information on how to create a myGov account and access the ATO’s myTax service, please click here.
To ensure a smooth closing of your Financial Year it is always best you also clear your current receivables and payables. Ensuring that you get all the payment that you entitled to as well as paying all invoices to your suppliers. There is nothing better than a tidy Financial book especially on the closing of Financial Year!
What is a Taxable Payments Annual Report (TPAR)?
If you operate a cleaning business that uses independent contractors/subcontractors, the ATO requires you to complete a Taxable Payments Annual Report (TPAR). A TPAR enables the ATO to monitor the income levels of “arm’s length” employees.
For more information on TPAR, please click here.
What is the $1,080 tax offset?
The Australian Government has made the so-called $1,080 tax offset available for the financial year. Put simply, this tax offset (more formally known as LMITO) is available to low- and middle-income taxpayers with a wage of less than $126,000.
The so-called $1,080 tax offset works on a sliding scale, meaning that the more you earn (up to $125,999 per annum), the greater the tax offset (capped at $1,080). You don’t have to apply for this particular tax offset, as the ATO calculates it automatically when you lodge your tax return.
For more information on the $1,080 tax offset, please click here.
What happens if my tax return is late?
Late tax returns are frowned upon by the ATO, but it’s advisable to lodge your overdue tax return/s as soon as possible (to minimise financial penalties). If extenuating circumstances have affected your ability to lodge on time, you should contact the ATO (in some cases, penalties for late lodgement may be withdrawn or reduced).
For more information on “failure to lodge on time” penalties, please click here.
Who are Abco?
Abco is a national supplier of iconic, quality and innovative cleaning and hygiene brands for over 20 years, with established offices in Sydney, Melbourne, Perth, and Brisbane. At Abco our core customer are contract cleaners and facility managers.