Accountants for Hair and Beauty Salons

Two different tests, depending on your structure

If your salon is a company, or a trust with a corporate trustee that trades, you are a constitutionally covered business. For work done from 26 August 2024 you fall under the whole of relationship test in section 15AA of the Fair Work Act. That test looks at the real substance, practical reality and true nature of the relationship, including how things actually work day to day, not just what the contract says.

If your salon is a sole trader or a partnership in Victoria, you are a state referred business and section 15AA expressly does not apply to you. You fall under the older start of relationship test, which looks at what the parties agreed at the outset.

Same chair, same stylist, same deal, two different tests. Worth knowing which one you are under before you write the agreement.

Either way, the factors are the same six: who controls how, when and where the work is done; who carries the financial risk and the cost of fixing mistakes; who supplies the tools and equipment; whether the stylist can send someone else to do the job; whether their hours are set; and whether ongoing work is expected. No single one decides it.

The Fair Work Ombudsman is explicit that having an ABN and issuing invoices does not make someone a contractor. That is the single most common misunderstanding we see.

The super trap that costs the most

This one catches salons even when the contractor status is genuine.

Under the super guarantee rules, a contractor is treated as an employee for super purposes if the contract is wholly or principally for their labour. All three of these have to apply:

• More than half the dollar value of the contract is for their labour.
• They are paid for their personal skills, not to deliver a result.
• They have to do the work themselves and cannot send a substitute.

A stylist who personally does the hair, cannot send someone else, and is paid for their time or a share of takings sits squarely inside that. The ATO says plainly that an ABN does not change the answer.

The clean exception is where you contract with a company, trust or partnership that employs the person doing the work. That removes the obligation. A sole trader stylist with an ABN does not.

If you have had chair renters for a few years and never paid super on them, that is worth a conversation now rather than later. Unpaid super compounds, and the charge is not deductible.

Does payroll tax catch rent a chair?

Straight answer: nobody has tested it in hair and beauty, and we will not pretend otherwise.

What we can tell you is this. The contractor provisions in the payroll tax law are general. They are not limited to medical practices, even though the only ruling on the subject is about medical centres. A stylist in your chair four days a week all year is obviously providing a service your salon ordinarily requires, and blows past the 90 day and 180 day exemptions.

The question that decides it is whether the salon pays the stylist anything. In a genuine rent a chair, the stylist takes their own money from their own clients and pays you rent. You pay them nothing, so there is nothing to treat as wages.

The risk sits in the very common hybrid, where everything goes through the salon's till and you remit the stylist's share. The Victorian Court of Appeal has held that handing money to someone who was already entitled to it still counts as a payment. So money that was arguably the stylist's all along, flowing through your account, can still be wages.

The practical comfort: Victoria's payroll tax threshold is $1,000,000 in annual wages, so most salons never get near it. If you are running several sites, or you are grouped with other entities, that comfort disappears and it is worth checking properly.

Four things salon owners get wrong in the award

The Hair and Beauty Industry Award 2020 (MA000005). Current rates applied from the first full pay period starting on or after 1 July 2026, after a 4.75% increase. Note that wording: the first full pay period, not 1 July itself. A Monday to Sunday cycle did not change until Monday 6 July 2026.

• Late nights. There is no evening penalty for full time and part time staff. Weekday ordinary hours run 7.00am to 9.00pm at base rate. The 150% late night rate applies to casuals only, before 7.00am and after 9.00pm. Owners get this wrong in both directions.
• Sunday. Ordinary hours on Sunday only run 10.00am to 5.00pm, and full time and part time staff are on double time. If you open at 9.00am on a Sunday, that first hour is outside the span entirely.
• Casual Saturday. 158% between 7.00am and 6.00pm, but 150% outside those hours. The rate goes down for early and late work, which is the opposite of what most people assume.
• Breaks are driven by hours actually worked, not rostered. Under 5 hours, no break entitlement. 5 hours or more, two paid 10 minute rest breaks plus an unpaid meal break.

Two allowances that get missed: the tool allowance of $10.52 a week where the employee has to supply their own tools, and the rule that special clothing must be supplied, paid for or reimbursed by you.

And on apprentices, all time worked is paid, including opening and closing, compulsory out of hours activities and off the job training. Unpaid Saturday training mornings and unpaid model nights are the classic breach.

What the ATO expects your numbers to look like

The ATO publishes small business benchmarks for hairdressers, based on the 2023-24 income year, as a percentage of turnover. These are the ranges it uses to decide whether a business looks normal.

• Turnover $50,000 to $150,000: total expenses 40% to 57%, cost of sales 12% to 18%, labour 23% to 36%, rent 14% to 21%.
• Turnover $150,001 to $300,000: total expenses 58% to 75%, cost of sales 11% to 16%, labour 25% to 37%, rent 11% to 17%.
• Turnover over $300,000: total expenses 75% to 86%, cost of sales 12% to 16%, labour 32% to 44%, rent 8% to 13%.

Total expenses is the one the ATO actually benchmarks against. The others are a guide.

Two uses for this. It tells you whether your cost of sales and labour are where the industry sits, which is a free sanity check on your pricing. And if you are well outside the range, it is better to know why before someone else asks.

Barbers and beauty services have their own separate benchmarks, so do not use the hairdressing ones if that is your main trade.

Super changed on 1 July 2026 and it affects you more than most

Two changes landed together, and salons feel both.

Payday super. Super now has to be paid each payday and reach the employee's fund within seven business days. If you run weekly or fortnightly pays, the money leaves far sooner than it used to under the quarterly rules. That is a cash flow change, not just an admin one.

The base changed too. Super is now calculated on qualifying earnings rather than ordinary time earnings, and all commission counts, including commission for work done outside normal hours, which did not count before. For a salon paying stylists a percentage of takings, super is 12% of the whole commission.

One warning on records. Overtime is still excluded, but only if your records clearly separate ordinary hours from overtime. If they do not, the whole lot counts. That is a bookkeeping problem that turns into a super bill.

What a chair actually has to earn

Most salon owners set a chair rate or a commission split by looking at what other salons charge. That is not pricing, that is copying.

A stylist does not cost you their wage. They cost you their wage plus super at 12%, plus leave and leave loading, plus WorkCover, plus their share of colour, foils, towels, backbar, software, rent and reception time. Then you lose hours, because not every rostered hour is a booked hour and not every booked hour is full price.

Work it from the other end. Take the real annual cost of that stylist, divide by the hours they will genuinely be booked, and you have the collections per hour they have to hit before you make anything. Then check your service menu against it. If a cut and colour takes 90 minutes and you charge $140, that is $93 an hour before product.

Our hourly rate calculator does both sides of this, your own rate and what each team member needs to bill out at. It is free and it takes two minutes.

Apprentices

Hairdressing and beauty therapy are both on the Australian Apprenticeships Priority List, which is what unlocks employer incentives for taking one on.

The thing to know is that the incentive settings change on 1 January 2027. Employers who start an apprenticeship before then keep the current arrangements. If you were planning to take on an apprentice anyway, starting before the end of 2026 is worth looking at. We will tell you what you actually qualify for rather than quoting you a headline number.

What we actually do

We are registered tax agents in the Latrobe Valley, working with salon and small business owners across Australia. Compliance is the floor. Lodgements done, on time, no surprises. The rest is where the value is.

• Tax planned through the BAS cycle so the bill is never a shock.
• Chair rates and service pricing modelled against what each stylist actually costs.
• Contractor and chair rental arrangements reviewed before they become a problem.
• Your numbers checked against the ATO benchmarks for your trade.
• Quoted up front, every time. You will never get an invoice you did not expect.

Questions salon owners ask us

This page is general information, current at the time of writing. It is not advice and it does not take your circumstances into account. Employment and payroll tax outcomes depend on the specific facts of each arrangement, and payroll tax is state based. Before you act on any of it, have your own arrangements reviewed. Sources: Fair Work Ombudsman, the Hair and Beauty Industry Award 2020 (MA000005), the Australian Taxation Office, and the State Revenue Office Victoria.