Clothing Deductions Hung Out to Dry

Tax & Accounting

The Australian Taxation Office is closely examining work-related clothing and laundry expense claims of taxpayers submitting their 2017-18 tax returns.

The ATO says that clothing claims are up nearly 20% over the last five years with people either making mistakes or deliberately over-claiming.  Common mistakes include people claiming ineligible clothing, claiming for something without having spent the money, and not being able to explain the basis for how the claim was calculated.

“Around a quarter of all clothing and laundry claims were exactly $150, which is the threshold that requires taxpayers to keep detailed records.  We are concerned that some taxpayers think they are entitled to claim $150 as a ‘standard deduction’ or a ‘safe amount’, even if they don’t meet the clothing and laundry requirements,” Assistant Commissioner Kath Anderson said.

While this announcement focuses on clothing related expenses, it has been clear for some time now that the ATO is paying very close attention to work related expenses in general.  All claims should be supported by evidence – just in case the ATO decides your claim requires closer scrutiny.  We have heard of a number of real-life examples in the last year or so where the ATO has queried and challenged very small deduction amounts which could not be supported by appropriate evidence.

What can I claim?

You can only claim a deduction for the cost of buying and cleaning:

  • Occupation-specific clothing– for example, the checked pants a chef would wear.
  • Protective clothing– fire-resistant and sun-protection clothing, safety-coloured vests, non-slip nurse’s shoes, rubber boots for concreters, steel-capped boots, gloves, overalls, and heavy-duty shirts and trousers, and overalls, smocks and aprons you wear to avoid damage or soiling to your ordinary clothes during your income-earning activities, and
  • Unique, distinctive uniforms– clothes that are designed and made for the employer and not publicly available – like shirts with the company logo.

Note: Just because your employer requires you to wear a suit, this does not mean you can claim the cost of the suit or its cleaning.

If you claim a $150 on clothing and laundry expenses, just be aware that you might be asked to prove these expenses.

If today’s article has raised questions about your personal tax deductions, our team are here and available to answer your questions

At CXC Financial Partners we are more than just Tax Agents, all our accountants are CA or CPA qualified and have experience maximising your allowable contractor deductions.  Their sole job is to ensure you pay the minimum tax you’re required to, leaving more money in your pocket for some of life’s luxuries.  Give the team a call to check whether you are getting the maximum return and don’t forget to ask if you’re entitled to a free or discounted return.

The tax team are on 1300 925 081 or taxservices@cxcfinancialpartners.com.au

Sep, 14, 2018

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