Cleaning Business Taxes – Tips, Tricks & Deductions

Whether you’re willing to establish a new cleaning business in Australia or are already operating it, you must know the ins and outs of the country’s taxation rules.

The Australian Taxation Office (ATO) regulates and collects all kinds of taxes in Australia; however, in some cases, it’s the job of the state government’s revenue offices.

Businesses can benefit from the tax deductions or concessions if they pay their taxes on time with honesty. However, every business registered as a company, including cleaning businesses, must pay the “company tax” without exception.

So it’s in your hands; either you want to make your firm’s tax payments monthly, quarterly, or annually.

If you want to know in detail which taxes apply to your cleaning business and how you can take advantage of the tax deductions, keep reading till the end.

Cleaning Business Taxes

What You'll


Core Business Taxes in Australia

The Australian Trade and Investment Commission (Austrade) lists down the key business taxes in the country as:

  • Company (income) tax
  • Capital gains tax (CGT)
  • Goods and services tax (GST)
  • Payroll tax

Company Tax

Company tax or income tax is subjected to every company registered in Australia, either resident or non-resident, at a constant rate determined by the government.

However, taxable income and the tax rate may differ under certain scenarios depending upon the structure of the business or the industry.

Primarily, the country has two types of company tax rates, including:

  • The Full Company Tax Rate: It is set at 30% for all the companies ineligible for the lower company tax rate.
  • The Lower Company Tax Rate: As for the income year 2020-2021, this rate is 26%. But the Australian Taxation Office claims that it will drop to 25% in the 2021-2022 income year.

So how to know if your business comes under full company tax rate or lower company tax rate?

To determine that, you’ve to follow the updated regulation by the Australian government. According to it, your business should be considered a base rate entity to fall under a lower company tax rate, i.e., 26%.

Therefore, you have to pay the taxes as per the lower company tax rate if your business comes under the following provisions:

  • Your business’s accumulated turnover or income for the whole income year is less than the aggregated turnover threshold; which is $50 million for 2020-2021 and the coming years.
  • Your passive income must be less than most (80%) of your business’s accumulated turnover.

Capital Gains Tax

You have to pay Capital Gains Tax (CGT) when you gain profit from selling an asset. It is settled as a part of your assessable income with the same rates as company tax.

All the businesses operating in Australia must keep a record of buying and selling an asset that may be eligible for CGT in the future.

In order to calculate your company’s CGT, you should first determine your capital gain. In most cases, you can do that by evaluating the difference between your asset’s initial price and the selling price.

For instance, if you buy $20,000 worth of assets and sell it for $40,000, your taxable capital gain would be $20,000.

Goods and Services Tax

The GST is a 10% consumer tax subject to a wide range of goods and services sold or used in Australia.

The Australian Taxation Office directs most businesses to register for GST in order to work freely within the Australian boundaries. Any firm that fulfils the following criteria is mandatory to pay GST:

  • Businesses having equal to or more than $75,000 GST turnover
  • Every non-profit organisation that makes a GST turnover of equal to or more than $150,000
  • Businesses involved in providing ride-sourcing services, like taxi or limousine
  • Businesses planning to claim fuel tax credits in the future

Once you register your company, you would be required to pay the total GST on all the sales from that day, along with the cost of penalties and interest.

Keep in mind that failing to do so will lead to serious legal consequences.

Payroll Tax

Payroll Tax is implied on the wages that companies pay to their employees. It is evaluated on the total salaries paid per month.

Each territory or state imposes its own threshold and tax rate while determining the payroll tax. When the amount of wages in a state exceeds its rate, it becomes mandatory for the business to pay the tax.

Additional Business Taxes

You may come across some other taxes regulated by the Australian government or the state government you’re operating in.

These taxes are subject to specific business activities, like land tax or fringe benefits tax (FBT).

Thus, while computing the total taxes due on your company, you should also review these taxes.

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Cleaning Business Taxes in Australia

It all narrows down to the point, how to register your cleaning business services for the taxes in Australia? To begin with this, you have to lodge a Taxable Payments Annual Report (TPAR) for each income year.

For that, you must have:

  • An Australian Business Number (ABN)
  • Made payments to any contractor for the services provided on your behalf

A point to remember is that the amount (wages) paid to the employees doesn’t count in your TPAR.

However, if your business provides mixed services (other than cleaning), you should register a TPAR when you receive your cleaning services payments equal to or more than 10% of your total GST turnover.

You can lodge a tax return for your business through:

  • A registered tax agent
  • Any software enabled by Standard Business Reporting (SBR)
  • Paper

Most importantly, you should analyse whether you need to register a TPAR each year.

As a smart and aware cleaning business owner, you must keep a record of your transactions. This helps you complete your TPAR process quickly and gives you a money trail of the payments you made or received from your contractors in that period.

Tax Deductions in Cleaning Businesses

If you’re working in a cleaning company or operating it, you have got plenty of tax concessions available. Therefore, it’s essential to be aware of all the nuts and bolts regarding it.

However, you’ve to be clever enough to claim the things at the right time, or you could miss out on a significant tax benefit (tax deduction).

These tax concessions apply to the expenses that you do from your pocket and aren’t provided to you by your employer.

To have a deeper insight into this, we’ve put together all the things you can claim when the tax time comes around.

Transport, Meals, and Accommodation

If you’re using your personal car for work-related tasks like travelling to meetings, company visits, or conferences, you can claim the expenses incurred on your vehicle.

Moreover, it’s necessary for you to own and maintain that car. If it’s given to you by your employer, you don’t fulfil the criteria of benefiting from the vehicle tax deductions.

Besides, you can also enjoy the tax deduction on the cost of transport, accommodation, and meals if you have worked overnight.

Protective Clothing and Uniforms

You can claim a deduction for the expenses of your occupation-related clothing, uniforms, and protective gear.

However, remember that the tax deductions will apply if the uniform has your company’s logo. Plus, it can be a non-mandatory dress registered with AusIndustry.

Additionally, the cost incurred in buying and repairing those clothes must be done from your personal account to be eligible for the tax concession.

Tools and Equipment

If you’ve purchased work-specific tools or equipment personally under $300, you become qualified to avail the tax deduction on them. However, if the cost surpasses $300, you can claim depreciation expenses of that asset for a lifetime.

Keep in mind that if a tool is used partially for both business and personal purposes, you should claim the tax deduction on the part you’ve used for work.

Extra Expenses

You may think of several expenses as negligible; in reality, they can help you take advantage of the tax deductions more effectively.

They include:

  • Protective equipment, including glasses, safety gloves, masks, sanitisers
  • Special uniforms, like sun-protective clothing
  • Renewal of the union fees, excluding the initial joining charges
  • Work-related phone calls and cellular data expenses
  • Stationary used for business purposes
  • Different sorts of training sessions, such as first aid training or OH&S training

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Effective Tips to Make the Most Out of Tax Deductions

No matter if you’re a cleaning business owner or employed as a cleaner, you should think smartly to gain more from the tax concessions.

Here are some tips that will help you:

  • Always take pictures of your receipts (clothing, tools, meals, and accommodation) to keep them safe as a record.
  • If you want to claim your personal vehicle costs, you should keep a trail of the trips to calculate the total kilometres travelled.
  • Fortunately, the Australian Taxation Office allows a tax deduction on home offices as well. So, claim a concession on the costs you incur on the stationary and equipment if you’re working from home.
  • As a cleaning business owner, reassess when you need to lodge a TPAR.
  • Ensure to keep a check on the date of your tax return and pay all your dues on time.

Final Words

The idea of starting a cleaning business in Australia comes with a lot of taxes and tax deductions.

However, you can make the most out of them by clearing your taxes before the due date.

Besides, with the above information and tips, you can easily save yourself a hefty amount of money by taking advantage of the tax deductions.

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the Complete Cleaning Business Starter Kit

Get our FREE Comprehensive Start-Up guide, complete with a checklist, business card template, pricing calculator and Invoice template.