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  • Clothing claims put through the wringer this Tax Time

    A focus on work-related clothing and laundry expenses this Tax Time will see the Australian Taxation Office (ATO) more closely examine taxpayers whose clothing claims don’t suit them.

    “Last year around 6 million people claimed work-related clothing and laundry expenses, with total claims adding up to nearly $1.8 billion. While many of these claims will be legitimate, we don’t think that half of all taxpayers would have been required to wear uniforms, protective clothing, or occupation-specific clothing,” Assistant Commissioner Kath Anderson said.

    With clothing claims up nearly 20% over the last five years, the ATO believes a lot of taxpayers are 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,” Ms Anderson said.

    “Just to be clear, the $150 limit is there to reduce the record-keeping burden, but it is not an automatic entitlement for everyone. While you don’t need written evidence for claims under $150, you must have spent the money, it must have been for uniform, protective or occupation-specific clothing that you were required to wear to earn your income, and you must be able to show us how you calculated your claim.”

    Ms Anderson said the ATO also has conventional clothing in its sights this year. “Many taxpayers do wear uniforms, occupation-specific or protective clothing and have legitimate claims. However, far too many are claiming for normal clothing, such as a suit or black pants. Some people think they can claim normal clothes because their boss told them to wear a certain colour, or items from the latest fashion clothing line. Others think they can claim normal clothes because they bought them just to wear to work.

    “Unfortunately they are all wrong - you can’t claim a deduction for normal clothing, even if your employer requires you to wear it, or you only wear it to work”.

    Ms Anderson warned taxpayers thinking of over-claiming that the ATO’s technology and access to data is improving each year.

    “We now scrutinise every return and we have sophisticated analytics to identify unusual claims, including comparing taxpayers to others in similar occupations earning similar income. If a red flag is raised, we will investigate. It might be as simple as checking with your employer to check if you were required to wear uniforms or protective clothing,” Ms Anderson said.

    The ATO is concerned that the results from its random audit program show lots of taxpayers over-claiming by a small amount.

    “We know that some people think $150 is not a large amount and that nobody will notice if they over-claim. But while $150 might not be big individually, when you multiply it over millions of taxpayers, it adds up to a lot. And besides, no matter how small, other Australians shouldn’t be expected to wear your over-claiming.”

    Ms Anderson said there are three golden rules to follow which will help taxpayers to get their deductions right.

    “One – you have to have spent the money yourself and can’t have been reimbursed, two – the claim must be directly related to earning your income, and three – you need a record to prove it.”

    Taxpayers who can’t substantiate their claims should expect to have them refused, and may be penalised for failing to take reasonable care when submitting their tax return.

    “To avoid the risk, we recommend taxpayers store clothing and laundry receipts in the ATO app's myDeductions tool. Keeping accurate records that can be uploaded to myTax or provided to a tax agent will make tax time much easier.”

    For more information about work-related expenses, visit ato.gov.au/deductions and to find out about myDeductions, visit ato.gov.au/mydeductions

    How to calculate your laundry claim

    Claiming $150 or less for clothing and laundry (and less than $300 for work-related expenses in total)?

    Make sure your claim is for eligible clothing (occupation-specific, protective or uniform). Remember, you can’t claim for plain or conventional clothing, even if your employer requires you to wear it and even if you only wear it to work.

    Calculate your claim for washing, drying and ironing at:

    • $1 per load if the load is made up only of work-related clothing
    • 50c per load if you include other laundry items

    You may be asked to demonstrate how often you wore your eligible clothing (eg. evidence that you worked three shifts a week for 48 weeks in a year)

    Case studies - Clothing claims hung out to dry

    Incorrectly claiming for plain clothing

    An advertising manager claimed $1854 for clothing and laundry expenses. Her claim was for clothing purchased at popular fashion retail stores.

    When we contacted her, she said she represented her company at work functions and awards nights and was required to dress a certain way.

    We explained that expenses for conventional clothing are not deductible, even if you are required to wear them for work, and/or only wear them for work. The taxpayer’s clothing and laundry claim was disallowed in full, and a penalty for failing to take reasonable care was applied.

    Unreasonable calculation of laundry claim

    A car detailer claimed work related laundry expenses of over $20,000 per year over two years.

    When questioned, the taxpayer told us he worked out the laundry expense at the rate of $227 per hour, as he valued his personal time. He then made a voluntary disclosure that his claim was excessively high and in no way a reasonable amount to claim.

    The taxpayer’s claims were reduced to $0 in accordance with his voluntary disclosure.  As he made a voluntary disclosure before our audit progressed, no penalties were applied. 

    Record keeping

    A lab technician claimed $2500 for the cost of purchasing protective boots and laundering his work uniform.

    He advised he had a very dirty job and mostly washed his clothes at the laundromat for around $9 a wash and $3 for drying. Unfortunately he did not keep any receipts, so we could not verify his claim.

    We reduced his claim for laundering his work uniform to $144, using the ATO’s reasonable basis.

    If you want to claim the cost of cleaning your eligible work clothes, you need to keep receipts for amounts greater than $150. You can use a reasonable basis for claims up to $150, being:

    • $1 per load if the load is made up of only work-related clothing
    • 50c per load if you include other laundry items in the load.
    Last modified: 14 Jun 2018QC 56001