EOFY TAX TIPS FOR HAIRDRESSERS. By Mark Chapman, Director of Tax Communications for H&R Block Australia.

Nobody wants to pay more tax that they have to and the key to minimising your taxes is to ensure that you claim all the tax deductions you’re entitled to. If you’re a hairdresser, there’s a long list of potential tax claims that might apply to you. Not all of them will apply to everyone but it will pay to spend a bit of time running your eyes down this list to see which of them apply to you.

The Golden Rules of Tax Deductions If you want to make a claim for work-related expenses, you need to follow the three golden rules:

• The expense must relate to your work

• You mustn’t have been reimbursed by your employer

• You must be able to prove that you spent the money. That means that you must keep receipts, invoices, or statements to demonstrate that you actually incurred the expense.

H&R Block’s tip is to keep electronic copies of all documentation relating to expenses. Paper receipts get lost or fade, so keeping everything together on your phone or computer will save time and effort when you come to complete next year’s tax return.

Get Help

There’s a reason why nearly 74% of people use a tax agent to help them do their taxes. Tax is complicated and stressful and if you do it yourself, you’re likely to make a mistake. You might claim something you weren’t entitled to and find yourself audited by the ATO or you might miss out on a deduction you could have claimed but didn’t realise was available to you; the result is a lower refund than you could have got. Using a tax agent like H&R Block takes away the stress and opens up a whole world of expertise to guide you through the process, so you can be sure you’re claiming everything you’re entitled to. You wouldn’t generally choose to treat a medical condition yourself; you’d see a doctor so why should tax be different? Get expert advice and the fee will generally be more than covered by the bigger refund, and the peace of mind.

Using your car

If you use your car as part of your work, for instance to travel to clients, between jobs, to expos or to collect supplies, you can claim the costs of your work-related journeys. If you use your own car, either claim 72 cents per kilometre up to a maximum 5,000 kms or keep a logbook and claim your actual expenses. You can also claim for parking, tolls, and public transport if you don’t use your car. You can’t claim the costs of traveling to and from work (the daily commute) though you might be able to make a claim if you’re required to transport bully equipment, which you can’t safely store at work (TIP: the ATO checks such claims closely so make sure you can prove your claim).

Equipment

You can claim the cost of buying tools and equipment that you use in your job or business. If the item costs $300 or less, you can claim it straight away and if the cost is more than $300, the cost is depreciated over several years. If you’re in business on your own account, rather than being employed by someone else, you can immediately write off all items of equipment whatever the cost. This could include makeup brushes and applicators, waxing kits, mobile phones, laptops and bags or briefcases. You can also claim the cost of insuring workrelated equipment.

Self-Education

You can claim the cost of any work-related courses that you undertake, provided that they relate directly to your current role and aren’t intended to boost your skills into a promotion or another role entirely. That could include courses on makeup techniques, massage, and nails. It could also include management training if you supervise staff. Courses run by a university or TAFE such as Cert IV in Beauty Therapy or Diploma in Salon Management could also be relevant. In addition to the cost of the course, you can claim travel costs to and from the course, accommodation, and meals if you’re required to sleep away from home, books, stationery, and depreciation on computer equipment used in your study.

Clothing

If you’re required to wear a uniform at your workplace, the cost of purchasing the uniform is claimable and you can also claim for the cost of cleaning the uniform. Conventional clothing doesn’t count as a uniform so ideally any garment you claim for should have the business logo on it. You can also claim for protective items such as gloves, aprons, hats or hair nets, goggles, and non-slip shoes.

COVID-19

If you are in an occupation that requires physical contact or proximity with customers or clients during the COVID-19 period, like the beauty industry, you can claim a deduction for items such as:

• Gloves

• Face masks

• Sanitiser

• Antibacterial spray.

In relation to COVID-19 tests, the government has announced that it’s making COVID-19 tests tax-deductible for Australian individuals when they are purchased for work-related purposes from 1 July 2021. However, the cost of the tests may already be tax deductible. Under the existing general deduction provisions, an individual may qualify for a tax deduction for the cost of a COVID-19 test (either PCR or RAT) where they are taken for work-related purposes, e.g., where there is a mandatory requirement under your employer’s COVID-19 policy. A COVID-19 test may also be required by certain countries and states in order for an employee to enter that territory or return to their home state.

This too is tax deductible where the test is required for a work-related trip. RAT kits purchased by individuals for private purposes (e.g., personal travel, convenience, no access to PCR testing) will not be tax deductible, either under existing law or under the government’s proposals. If you incur transport expenses to get to and from the site of a COVID-19 PCR test (or expenses in traveling to the chemist or supermarket to acquire an RAT), these will not be tax deductible as they are regarded as private expenses, even if the test is a condition of your employment.

Working from home

As a result of COVID-19, you have probably had to relocate your working activity from business premises to your home. If so, you can claim a rate of 80 cents per work hour, so you will need to keep a record of the number of hours you have worked from home as a result of COVID-19. This will apply until at least 30 June 2022. If you use the 80 cents per hour method, you can make no other claims in relation to working from home. So, items like mobile phone and internet usage are included in the 80-cent rate. The alternative rate of 52 cents per hour may be more appropriate.

This doesn’t include phone costs, home internet or the cost of writing off home IT equipment so when you make separate claims for those expenses, you may find that your total claim is higher. Your tax agent will be able to advise on which method produces the best results. If you run you own business from home, you can also claim occupancy expenses. These include the work-related portions of expenses such as mortgage interest (if you’re a homeowner) and rent (if you’re a tenant), as well as rates and home insurance. Remember, if you own your home and claim expenses such as these, you’ll lose the Capital Gain Tax main residence exemption on the same proportion of your home that you’ve claimed expenses for.

Other deductions

Don’t forget to claim these costs if they are relevant to you.

• Claim for professional subscriptions, whether to a professional body or to a trade union.

• The cost of work-related magazines and journals

• The cost of work-related books (for instance, books focussing on styling, colour, beauty, or management)

• If you’re required to work overtime, you can claim for the cost of buying meals provided you have been paid an allowance by your employer.

• Agency costs: if you get your work through an agency, the cost is claimable.

• The cost of using a tax agent is itself tax deductible, including costs incurred in travelling to see the tax agent.

• If you use your mobile phone for work purposes, you can claim a proportion of both the cost of the phone and the monthly bill, to the extent that the costs relate to work or business.

• If you attend exhibitions, competitions or other events in a professional capacity, the costs are claimable.

• Claim for conference expenses. As well as the cost of the conference itself, that can also include travel, meals, and accommodation costs – even where the conference is overseas, though you might need to apportion the costs (and disallow the private bit) if you spent some downtime on the beach afterwards!

• You can claim a deduction for charitable donations provided the amount is $2 or more and you have a receipt.

Head to www.hrblock.com.au to book a consultation with your local agent; they can identify exactly what you need to do, and claim, to get into shape for the 2022 tax season and maximise your deductions.