WHAT AUSTRALIAN SALON OWNERS CAN CLAIM AT TAX TIME

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Posted June 9, 2021

Supplied to HABA by the Australian Tax Office (ATO) as the only official industry association for Salon Owners.

 

It’s tax time! It pays to learn what work-related expenses you can claim.

Tax time seems to creep up on small business owners each and every year. Usually, we are so busy in the running of our business that tax time seems to come and go, until the point where our accountant is calling us, asking us where the shoebox of receipts is this year. In 2021, it pays to be on top of your tax –  and the sooner you get started the better.

Do you know what you can and can’t claim during tax time? Lodging your tax return is easy with the ATO’s work-related expenses guide for hairdressers and beauty therapists. 

When completing your tax return, you may be able to claim deductions for some work-related expenses. 

To claim a work-related deduction: 

• you must have spent the money yourself and weren’t reimbursed 
• it must directly relate to earning your income 
• you must have a record to prove it. 

If the expense was for both work and private purposes, you can only claim a deduction for the work-related portion.
You can use the myDeductions tool in the ATO app to keep track of your expenses and receipts throughout the year.

Common deductions for hairdressers and beauty therapists can include:

Travel Expenses 

You can claim a deduction for travel expenses if you are required to travel away from your home overnight in the course of performing your duties – for example, to attend a conference, seminar, training course or industry promotion. This could include meals, accommodation, fares, and incidental expenses that you incur.

You can’t claim a deduction if the travel is paid for (say, by a supplier or event host), or you are reimbursed by another person. You still need to show that you were away overnight, you spent the money yourself, and the travel was directly related to your business.

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Tools and equipment 

You can claim a deduction for the cost of tools and equipment that you use for work, such as hair cutting and hair styling tools. If you use the tools and equipment for work-related purposes as well as private purposes – for example, you cut your family’s hair with your scissors at home – you can only claim a deduction for your work-related use of the tools and equipment.

If a tool or item of work equipment cost:

• $300 or less – you can claim an immediate deduction for the whole cost.
• More than $300 – you can claim a deduction for the cost over a number of years (decline in value)
• As we reported previously, the government will be extending temporary full expensing and temporary loss carry-back for an additional year until 30 June 2023. This will see an additional $20.7 billion in tax relief to businesses over the forward estimates period.

You can claim a deduction for the cost of repairing your tools and equipment you use for work. If the tools or equipment were also used for private purposes, you can’t claim a deduction for that part of the repair cost that relates to your private use of the tools and equipment.

 

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Self-education expenses

You can claim a deduction for self-education expenses if your course relates directly to your current business, such as advanced colouring, cutting and up-style courses. Even small business, management and computing courses may be considered a part of self-education expenses

You can’t claim a deduction if your study is only related in a general way or is designed to help you gain general knowledge. For example, if you’re a hairdresser you can’t claim the cost of study to enable you to become a make-up artist. 

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Clothing expenses and laundry

You can claim a deduction for the cost of buying, hiring, mending or cleaning certain uniforms that are unique and distinctive to your business.

You can claim a deduction for protective clothing that your staff and yourself are required to wear – for example, face masks and gloves.

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Personal grooming and beauty products

You can’t claim a deduction for hairdressing, cosmetics, hair and skin care products and other beauty products, even if your employer tells you to use them – they are personal expenses.

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Other expenses

As long as the expense relates to your business, you can claim a deduction for the business-related portion of the cost of:

• Mobile phone calls, internet charges and electricity bills. This is particularly important as many salon owners are now doing administration work from home, and therefor a percentage of your bill is claimable by the business
• Union and professional association fees
• Technical or professional publications

Its important to note that your HABA Membership fees, while contributing to programs that we undertake to provide services and represent salon owners across the industry, are also completely tax deductible. You can use your income statement as evidence of the amount you pay if it’s shown on there.

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For salon owners, the real benefit of claiming different things on tax comes into play when it is a cumulative effect – each of the claims might be quite small, but together they can be significant to your bottom line.

Consider ALL the bills, invoices and fees you’ve paid from the above categories when collating your receipts this year – every little bit counts and it’s important to consider all avenues, in conjunction with your accountatn, ahead of lodging your tax.

The ATO offers a really detailed guide to what you can and can’t claim at tax time in the Hair & Beauty Industry, which is helpful if you or your staff have any particular questions.

Read the complete Hairdressers and beauty professionals – income and work-related deductions guide here.