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Ruling

Subject: Conventional clothing

Question 1:

Are you entitled to a deduction for expenditure on conventional clothing over and above your personal requirements?

Answer:

No

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

You are employed in a particular profession and you also act as an advisor to your employer.

You are required to accompany your employer on a daily basis to functions.

Depending on the function you are required to undergo frequent changes of clothing.

Changes include day and evening wear as well as changes during the day to accommodate particular and suit the ambience of the function.

Some weeks you can have a change of clothing 2 or 3 times a day. On other weeks you could only have 2 or 3 changes in the week.

To achieve and accommodate the requirements of your demanding job you have purchased an extensive wardrobe over and above your normal requirements.

The purchase of items of clothing includes items you would not normally wear but are considered necessary by your employer.

You have substantiation for your clothing expenses of which you consider 25% to be conventional in nature and have therefore limited your claim.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

Summary

There is insufficient connection between your additional expenditure on conventional clothing expenditure and the derivation of your income. Accordingly, the expenses are private in nature and therefore not deductible.

Detailed reasoning

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature.

Expenditure on clothing is generally considered to be essentially an item of private expenditure unless the clothing is incidental and relevant to the taxpayer's occupation. Expenditure on clothing which is in the nature of a uniform prescribed by the employer or is protective in nature is deductible. However, expenditure on conventional clothing (that is, clothing of a type which is usually worn by men or women regardless of their occupation) is considered to be private in nature and is not deductible.

You have argued that there is sufficient nexus between your employment and your extra clothing expenses. This argument was based on the case FC of T v Edwards 94 ATC 4255; 28 ATR 87 (Edwards case).

Taxation Ruling TR 94/22 is quite clear that in most cases expenditure on conventional clothing is not deductible and that Edwards case does not establish a principle that clothing acquired for and worn at work will be deductible. Rather Edwards case was an example of a case where there exists a sufficient nexus between the conventional clothing and the income earning activities to allow the deduction.

Paragraph 8 of TR 94/22 states that for expenditure by an employee to be deductible it must have the essential character of an outgoing incurred in gaining assessable income, or in other words, of an income producing expense. There must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of the assessable income. Whether such a connection exists is a question of fact to be determined by reference to all the facts of the particular case. In most cases a sufficient connection will not exist between expenditure on conventional clothing and the derivation of assessable income by an employee taxpayer.

In Case 48/94 94 ATC 422; AAT Case 9679 (1994) 29 ATR 1077, the taxpayer, a self-employed professional presenter and speaker, submitted that her circumstances were comparable to those of the taxpayer in Edwards case. The taxpayer maintained a separate wardrobe to meet her work requirements and used this wardrobe exclusively in relation to her work. Sometimes, a client would request that she dress in a specific manner when performing a presentation. Her image was of vital importance in both securing and performing her duties and her clothes were an aspect of her image.

· Senior member Barbour, in disallowing the deduction for the cost of the clothing said (ATC at 427; ATR 1083) that: 

· While the A list clothes [those used exclusively for work] assisted in creating an image compatible with the applicant's perceptions of their clients' and audiences' expectations, their activities productive of income did not turn upon wearing A list clothes, however important the applicant may have perceived these clothes to be in their presentation activities. There is not the requisite nexus between income earning activities and the A list clothing. 

He went on to say (ATC at 427-428; ATR at 1083-1084) that: 

the expense is not a business expense is also indicated by the conventionality of the clothing. The applicant did not buy specific clothes for specific presentations (as an entertainer might) or have clothes that were specific and suited only for their employment or business (as a nurse might). The applicant chose to wear their A list clothes for business only, but this does not then enable the expense in purchasing those clothes to be treated as a business expense. Nor did she wear several changes of clothes while performing their duties, such that this expense for additional clothing was purely for the purpose of gaining or producing income, and hence properly regarded as a business expense, despite its conventionality (as in Edwards).

In Edwards case the taxpayer was previously employed as an executive secretary and as a consequence their existing wardrobe was of the requisite quality. The new employment resulted in a need to increase the quantity and to include hats, gloves and formal evening wear. Additional clothing was necessitated by employment activities taking her outside Brisbane in circumstances where laundry facilities were not readily available. Consequently a supply of immediately wearable fresh clothing was required.

The quantity and quality clothing was in excess of normal every day requirements. The taxpayer 'lived in' with the employer and the employment was a seven-days-a week occupation and they very seldom had opportunity to wear a formal wardrobe for private purposes. In the course of the new employment it was normal that changing attire several times during the course of a day. The taxpayer described two changes of clothes in one day as being `very normal' and... three changes of clothes in one day as being `not abnormal'.

The facts in Edwards case can be distinguished from your circumstances. You have stated that some weeks you make 2-3 changes for the week and others you would make 2-3 changes in a day. In your case you do not have the same frequency in changes of clothing as in Edwards case. Furthermore the formal clothing purchased by Edwards could not be used for any other purpose.

It is acknowledged that you are expected to dress in a particular manner as you fulfil your various roles attending work activities. Wearing suitable clothing at functions may have been considered necessary by your employer, however it is not incidental and relevant to the derivation of your income. Attending functions and performing your work duties is relevant to the derivation of your income, wearing suitable clothing is merely a prerequisite to attending these functions.

The expenses are private in nature and therefore not deductible under section 8-1 of the ITAA 1997.

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