Commercial and residential cleaning businesses share a common financial profile: wages and subcontractor costs account for 60–70% of revenue, margins are thin, and the work is often structured around contracted sites with fixed-price weekly or monthly billing. It is a sector the ATO pays close attention to — both for sham contracting and for Taxable Payments Annual Report (TPAR) compliance — and the bookkeeper plays a critical role in keeping the business on the right side of both obligations.
Labour Cost Structure
Cleaning businesses typically have the highest labour cost ratio of any service sector. The wage bill covers:
- Employed cleaners on hourly rates under the Cleaning Services Award 2020 (MA000022).
- Leading hands or site supervisors on higher pay grades.
- Management and business development staff.
The Award sets minimum rates for various cleaning classifications (general, window cleaning, hazmat). Underpaying employees in the cleaning industry has been a focus of Fair Work Ombudsman investigations, and the bookkeeper should flag if the payroll system is not mapping pay codes to the correct Award classifications.
PAYG withholding applies to all employed cleaners. Withholding is calculated using the ATO's tax withheld tables and remitted either monthly or quarterly depending on the employer's withholder size. STP Phase 2 reporting is mandatory for all employers.
Superannuation at 11.5% applies to ordinary time earnings. Cleaning rosters often include penalty rates for evening, weekend, and public holiday shifts. The super guarantee is calculated on the base rate, not the grossed-up rate including penalties — confirm the payroll system is applying this correctly.
Subcontractor vs. Employee: The Sham Contracting Risk
The cleaning industry has a long history of misclassifying employees as subcontractors. Warning signs include:
- A cleaner who works exclusively for one business, uses that business's equipment, and has no ability to delegate the work to anyone else.
- Subcontractors paid an hourly rate with no ability to profit from efficient performance.
- Cleaning contractors who wear the principal's uniform and are rostered by the principal's operations team.
If any of these characteristics are present, the arrangement is likely an employment relationship. The consequences of misclassification are significant: back-payment of superannuation (plus the SGC charge and 10% interest), PAYG withholding shortfalls, and potential payroll tax underpayments. The Fair Work Act 2009's sham contracting provisions can also expose the business to civil penalties.
Where subcontractors are legitimately engaged (e.g., a specialist window cleaning company subcontracted to handle high-rise work), the Taxable Payments Reporting System applies.
Taxable Payments Annual Report (TPAR)
Cleaning is one of the designated TPAR industries under the Taxation Administration Act 1953. Any cleaning business that:
- Provides cleaning services as part of its business activity, AND
- Makes payments to contractors (individuals or companies) for cleaning services
must lodge a TPAR by 28 August each year, covering all contractor payments made in the preceding financial year (1 July – 30 June).
The report captures: contractor ABN, name, address, total gross amount paid, and total GST withheld (if any). A contractor without an ABN should have 47% withheld from their payment (no-ABN withholding) and this must also be reflected in the TPAR.
Tip: set up a dedicated subcontractor ledger code in the chart of accounts that captures contractor payments separately from employee wages. This makes TPAR extraction at 28 August a simple report pull rather than a manual reconciliation exercise.
GST on Cleaning Services
Cleaning services are taxable supplies at 10% GST. There are no GST-free or input-taxed carve-outs for cleaning — unlike healthcare or fresh food. Once the business's turnover exceeds $75,000, GST registration is mandatory, and the business must issue tax invoices and lodge BAS.
Common GST compliance gaps in cleaning:
- Cash invoices issued without GST — particularly for residential clients who are not GST-registered and don't need a tax invoice.
- Subcontractors invoicing without GST because they haven't registered (an issue for the subcontractor, but the principal should flag it if the subcontractor's income clearly exceeds the threshold).
- Consumables purchased for on-supply to clients (cleaning chemicals for a site) — these may be a separate taxable supply or bundled into the service price; the treatment should be consistent.
Vehicle Expenses for Mobile Cleaners
Residential cleaning businesses operate mobile — cleaners travel to client properties in company vans or their personal vehicles. Vehicle expense treatment depends on who owns the vehicle:
- Company-owned vans: Fully deductible for the business. GST claimed on purchase (if the van is not dual-cab with personal use) and on running costs. If employees use company vans for private travel, an FBT liability may arise.
- Employee's personal vehicle: The employee may be reimbursed at the ATO's cents-per-kilometre rate. The reimbursement is exempt from PAYG withholding if it does not exceed the ATO rate (88 cents/km for 2025-26). Amounts above the ATO rate are taxable to the employee.
- Sole trader owner's vehicle: Logbook method or cents-per-kilometre method applies for the business-use portion.
Public Liability and Workers Compensation Insurance
Public liability insurance for a cleaning business is a significant annual premium — cleaning staff handle client property and cleaning chemicals in client spaces. The premium is fully deductible as a business expense.
Workers compensation insurance is compulsory for all states where employees are engaged. Premium rates in the cleaning sector are higher than the general labour average due to the injury risk from manual handling, chemicals, and wet surfaces. The bookkeeper should ensure the premium is allocated to an insurance expense account (not capitalised) and reconciled to the renewal notice annually.
Legislation and Further Reading
- Cleaning Services Award 2020 (MA000022) — minimum rates and classifications
- Fair Work Act 2009 — sham contracting provisions
- Taxation Administration Act 1953 — TPAR obligations
- ATO website — Taxable Payments Annual Report (cleaning industry)
- ATO — superannuation guarantee and ordinary time earnings
- A New Tax System (Goods and Services Tax) Act 1999 — taxable supplies and registration threshold