Hairdressers: Keep Tax Time Stress-free
Hairdressers: Keep Tax Time Stress-free with our End of Financial Year Checklist for Salons Owners
As the end of the financial year (EOFY) approaches, hairdressers and barbers across Australia are preparing their businesses for tax season. A well-organised checklist can make this process smoother and makes tax time stress-free for hairdressers and barber salon owners. Whether you’re a solo stylist or own a bustling salon, there are essential steps to keep in mind. Here’s a straightforward guide to ensure you wrap up the financial year with confidence and clarity.
1. Organise Financial Records
The EOFY can feel overwhelming, but getting your records in order is the first step to stress-free tax time. Start by gathering all your invoices, receipts, and bank statements. Use accounting software to streamline this process if you haven’t already. Digital tools can significantly reduce the time spent tracking expenses, so you’re not scrambling at the last minute.
Statistic: According to a recent survey, 75% of small businesses that use accounting software save an average of five hours per week on admin tasks.
2. Review Cash Flow and Profitability
A clear understanding of your cash flow and profitability is essential for EOFY. Look at how your income and expenses have fluctuated over the past year. Assess which services brought in the most revenue and where you may have overspent. This analysis can help you make informed decisions on future investments and service pricing.
For example, if hair colouring services drive 40% of your income, it might be wise to allocate more budget to products and training in that area.
3. Calculate Work-Related Expenses and Deductions
Hairdressers and barbers can claim a range of work-related expenses. Some deductions may include:
- Professional tools and equipment
- Uniforms or protective clothing
- Cleaning and laundry costs
- Training courses and industry-related workshops
Keep receipts for all these expenses to maximise your claims. This could save you hundreds—or even thousands—of dollars at tax time.
Expert Insight: Claiming legitimate deductions is one of the best ways for salon owners to reduce their taxable income.
4. Depreciate Your Assets
Equipment such as salon chairs, mirrors, and wash basins depreciate over time. The ATO allows you to claim depreciation on these items, which can reduce your taxable income. Work with your accountant to ensure you’re correctly recording depreciation and taking full advantage of this deduction.
5. Pay Superannuation for Employees
If you employ staff, paying their superannuation on time is essential. The Superannuation Guarantee requires employers to contribute a minimum of 11% of each employee’s salary. Meeting this obligation not only keeps you compliant but also ensures your team’s financial well-being.
The due date for super contributions for the final quarter of the financial year is 28 July. Late payments can incur penalties, so it’s best to plan early.
6. Plan for the Small Business Tax Offset
If your salon operates as a sole trader, partnership, or is structured as a small business, you may be eligible for the small business tax offset. This offset can reduce the amount of tax you owe, putting more money back into your business.
7. Stocktake and Inventory Management
EOFY is an ideal time to conduct a thorough stocktake. Count your stock on hand, from shampoo and conditioner to hair dyes and styling products. A stocktake helps you track what’s selling and highlights areas where you may need to adjust your ordering process. The cost of unsold stock or wasted products can add up, so it’s wise to only invest in items that drive revenue.
8. Prepare for Next Year’s Budget
A solid budget can make next year’s EOFY even easier. Review your revenue and expenses over the last year and use this data to forecast next year’s budget. Identify areas where you may want to cut costs, invest in training, or upgrade equipment. This strategic approach helps you stay on top of finances and set realistic goals.
9. Consider Professional Advice
If EOFY still feels daunting, consider consulting an accountant who specialises in small business or the hairdressing industry. A professional can help identify deductions, keep you compliant with ATO requirements, and advise on ways to grow your business. Many salon owners find that professional advice ultimately pays for itself in tax savings.
Expert Insight: An experienced tax advisor will help you make the most of deductions you might miss on your own.
10. Lodge Your Tax Return on Time
For sole traders, the due date for lodging individual tax returns is typically 31 October. However, if you work with a registered tax agent, you may have additional time. Planning and lodging your return on time helps you avoid late fees and ensures a smoother tax season.
Final Thoughts on EOFY Preparation
Following a checklist can simplify the EOFY process, making tax time a more manageable experience. With financial records in order, a clear understanding of deductions, and strategic planning, you can approach the end of the financial year with confidence. Investing time now means less stress and more success for your salon in the year ahead.
EOFY doesn’t have to be stressful. With some preparation, you’ll close out the year strong and be ready for a prosperous new financial year. Happy tax time, and here’s to a successful year in your salon!
Addition Articles in our Hairdresser and Barber Salon Series:
Hairdressers: Managing Cash Flow in Quiet Season
Hairdressers: Unique Selling Point of Your Salon
Hairdressers: Use Financial KPIs to Grow Your Salon