Hospitality tips, income and your status: employed or ABN?

Tips are income, and they are yours to declare

Start with the money coming in, because this is the part hospitality is most likely to get caught on. Every tip you earn is assessable income, no matter how it reaches you. A note pressed into your hand at the end of a good night, a few dollars added on the card machine, or your share of a pool the venue splits between the floor and the kitchen: all of it counts, and all of it goes on your return. This is not us being strict for the sake of it. It is simply how tips are treated, and it is the same for cash wages if you are ever paid that way.

The practical bit is where the tips land before you see them. When the venue shares out card or pooled tips, they usually run through the till and turn up in the income statement you get through myGov, so that side is already counted for you. Cash handed to you straight across the bar is the one that often does not show up anywhere, and that is exactly the tip you need to look after. Keep a running tally as you go, a note on your phone at the end of each shift is plenty, and add it in at tax time. Declare your tips and jot down the cash ones, and this part of your tax is done.

The other thing to get right is your status

Once the income is sorted, there is one more question that shapes everything else on these pages: are you a PAYG employee, or are you working under an ABN? It sounds like paperwork, but it decides how you are taxed and what you are able to claim, so it is worth thirty seconds even if you are fairly sure. The good news is that it usually settles quickly. Almost everyone pulling beers, running plates, working the pass or the coffee machine is an employee, so that is who this whole guide is written for. A small number of hospitality workers are on an ABN, and if that turns out to be you, some of the rules below change.

How to tell which one you are

You do not need to dig out a contract for this. The way you get paid tells you plainly.

• You are an employee if tax comes out before you do. Each pay has PAYG tax already taken out, an income statement lands in myGov after the year closes, and the venue pays super in for you. Someone else is carrying the tax, and you just see what hits the account.
• You are on an ABN if you invoice and keep the lot. You bill the venue under your own ABN, they pay you the full amount with nothing held back, and sorting out the tax and super afterwards is on you.

Most hospitality staff read straight down the first line. The people who sometimes sit on the second are function and event casuals hired for a one-off, freelance or private chefs cooking for clients, mobile coffee-cart operators running their own rig, and some bar staff brought in on a contract. If that is not you, you are an employee, and you are in the right place.

What changes if you are on an ABN

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

• You declare all of your income. Everything a client or venue pays you goes on the return in full, by card, transfer or cash, since no one has withheld anything along the way.
• Your deductions are broader. A business can claim costs an employee never could, from insurance and accounting fees to advertising and a wider run of the gear and running costs the work needs.
• GST arrives at $75,000. Once your turnover reaches $75,000 in a rolling twelve months you must register for GST, charge it on your work, and lodge a business activity statement, the BAS, through the year. Under that line you generally do not.
• The tax and super are yours to set aside. With nothing withheld and no employer paying super in, putting money away as you earn it is down to you.

That is the outline, not the full picture, and running an ABN is a real set of obligations. If this is you, the rules are wider than one chapter can properly cover, and a registered tax agent will more than earn their fee. One thing worth naming plainly: some venues put casual floor or kitchen staff on an ABN when the work is really just a job, with set shifts and someone else calling the shots. Genuine hospitality staff are almost always employees whatever the venue chooses to call it, so if that sounds like your situation, get advice on where you actually stand before you lodge anything.

Your records depend on which one you are

Whichever side you land on, the trick is writing things down as they happen rather than reconstructing the year in July. What you keep differs, though. As an employee you hold onto receipts for the gear you paid for yourself, a note of the work share on anything used for both work and life, and that running tally of the cash tips you took. On an ABN you keep full business records, income and expenses both, and the BAS lodgements as well once GST is in play. Either way, the ATO's free myDeductions app will hold the basics for you as you go.

The bottom line

Two things carry this chapter. Declare every tip, including the cash ones no one else is tracking, and keep a quiet tally so nothing gets lost. Then, if you are not certain whether you are an employee or working under an ABN, settle that before you do anything else, because it decides how you are taxed and what the rest of this guide means for you. Sort those two, and everything that follows lands where it should.

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