Cleaner tax: employed or sole trader on an ABN?

Why this is the first question to settle

Before you work out a single deduction, there is one thing to get straight, and almost no cleaning article stops to ask it. Are you a PAYG employee, or a sole trader working under your own ABN? The answer changes what the word deductible even means for you, what you lodge at the end of the year, and whether GST is part of your life at all. Cleaning splits neatly across the two. Many domestic and house cleaners run their own ABN. Many commercial, office and contract cleaners are employees on a payroll. Some people are both in the one year, a weekday shift for a company and weekend jobs of their own. Sort out which one you are, and the rest of this guide slots into place. Skip it, and you can end up following rules written for the wrong situation.

How to tell which one you are

You do not have to guess or read the fine print of a contract. The way you get paid answers it for you. Look at two simple things.

• Is tax taken out before the money reaches you? If tax is withheld from each pay and you collect an income statement through myGov around mid-July, you are an employee. Your boss pays super in for you, and most employed cleaners sit under the Cleaning Services Award. Someone else is handling the tax, and you just see what lands in the account.
• Do you send an invoice, set your own price, or get the full amount with nothing held back? If you bill for the job under your own ABN and keep the whole payment until you sort out tax yourself, you are a sole trader. That is the usual shape for a cleaner working directly for households, or picking up jobs through a platform like Airtasker.

If both answers point the same way, you have your answer. If one pay works one way and another works the other, you are wearing both hats, and there is a short section on that below.

What the employed cleaner claims

If tax comes out before you are paid, you are in the right place, because this whole guide is written for you. Your job at tax time is to claim back the work costs you covered yourself and no one paid you for. For a cleaner that is the spray and cloths you grabbed at the servo on the way to a job, the PPE and non-slip shoes that keep you safe on wet floors, the washing of a logo uniform, the driving between sites in a single day, the work share of your phone for rosters and jobs, your union fee, and study that keeps your current role sharp. One catch shapes the size of that list. Commercial and contract sites usually supply the chemicals, the machines, and often the uniform, and anything the employer or client hands you or pays you back for is not your expense. That is why an employed cleaner's pool of claimable products is smaller than a cleaner running their own kit, and it is worth being honest about rather than claiming the whole cupboard.

What changes if you are a sole trader

If you invoice under your own ABN, you are not filling in a wages return. You are running a small cleaning business, and the rules open up in both directions.

• All your income is declared, cash included. Every job you are paid for goes on the return, whether it came by transfer, card or cash in hand.
• Your deductions are broader. On top of the usual work costs, a business can claim things an employee never could: public liability insurance, your accountant's fee, the commission a platform takes, advertising to find clients, some home-office admin, and larger vehicle claims for the driving the business runs on.
• GST arrives at $75,000. Once your turnover reaches $75,000 in a rolling twelve months you must register for GST, start charging it on your jobs, and lodge a business activity statement, the BAS, through the year. Under that line you generally do not.
• The ATO already sees your platform work. Payments made to you through cleaning platforms are reported to the ATO under the taxable payments reporting system, so that income is visible whether or not you list it.
• You may owe tax through the year. Depending on your income you can be put on PAYG instalments, paying tax in stages rather than one hit, and if most of your income is your own labour the personal services income rules can shape how it is treated.

That is the shape of it, not the full course. Running an ABN is a real set of obligations, and if this is you, the rules are broader than one chapter can properly cover. A registered tax agent who works with sole-trader cleaners will save you more than the fee, especially the first year GST comes into play.

If you are both in the one year

Plenty of cleaners do a weekday shift for a company and take their own jobs on the weekend through a platform. When that is you, keep the two lives apart. On the employee side sit your wages and the work deductions this guide covers. On the business side sit the money you invoiced and the business deductions that go with it. Two sets of records, kept separately, so neither one muddies the other at tax time.

The records differ too

Whichever side you land on, the habit that saves you is writing things down as they happen, not hunting for them in July. What you keep is not quite the same, though. An employee keeps receipts for the gear and products bought, a note of the work share on anything used for both work and life, and a logbook or kilometre record for the driving between sites. A sole trader keeps full business records, income and expenses both, and if turnover has passed the GST line, the BAS lodgements as well. The ATO's free myDeductions app will hold the basics either way.

The bottom line

Work out which one you are first, because everything else follows from it. Check how you are paid: tax withheld and super going in means you are an employee, and this guide claims your work costs against your wages. An invoice under your own ABN means you are running a business, with broader deductions and, past $75,000, GST and a BAS to manage. Settle that one question and every hour you put into your tax lands in the right place, instead of solving a problem that was never yours.

General information only, not tax advice. Check the ATO or a registered tax agent for your situation.