Edited version of your written advice

Authorisation Number: 1051212226602

Date of advice: 10 April 2017

Ruling

Subject: Work-related expenses

Question 1

Are you entitled to a deduction for the purchase of the relevant stockings as a work related expense?

Answer

Yes

Question 2

Are you entitled to a deduction for the purchase of make-up as a work related expense?

Answer

No.

Question 3

Are you entitled to a deduction for the purchase of hair regrowth product as a work related expense?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are employed as an inspector at an entertainment business.

You purchased make up, stockings and hair regrowth product for employment purposes.

Wearing makeup and stockings is compulsory for your work, as mandated by the employer.

As this is a service industry you choose to use hair regrowth product.

The stockings are required by the employer to be a distinctive colour and type.

The stocking are worn as part of a distinctive uniform.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

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.

Compulsory Uniform/Wardrobe

The cost of acquiring and maintaining a compulsory uniform or corporate wardrobe is an allowable deduction under section 8-1 of the ITAA 1997. A compulsory uniform or corporate wardrobe is a collection of items that:

● Distinctly identifies an employee as part of a particular organisation

● An employer makes it a condition of service to wear those items.

It is the compulsory and distinctive characteristics that form a sufficient connection between the expenditure on the uniform and the work activity making this expense allowable as a general deduction.

The Commissioner uses certain criteria to determine whether a particular set of clothing is a compulsory uniform/corporate wardrobe. These criteria can be found in Taxation Determination TD 1999/62 Income tax: what are the criteria to be considered in deciding whether clothing items constitute a compulsory corporate uniform/wardrobe for the purposes of paragraph 30 of Taxation Ruling TR 97/12?

A compulsory uniform or wardrobe is clothing that an employer has prescribed in an expressed policy that makes it a requirement for employees to wear that type of clothing while at work. The policy must stipulate the characteristics of the colour, style and type of clothing and accessories that make up the uniform or wardrobe and its distinctiveness. The clothing must identify to the casual observer, the person as being a particular employee of the employer. The wearing of the uniform/wardrobe must be compulsory and should be strictly and consistently enforced.

A deduction is also allowable for single items of clothing worn at work where a prescribed policy exists, the item of clothing is distinctive, the wearing of it is compulsory and the policy is strictly enforced. As such, the stockings you are required to wear are allowable as deductions.

However, expenditure on accessory items, such as handbags, shoes and trench coats that do not bear any distinguishable features, such as a corporate identifier, is considered to be of a private nature. Therefore the shoes you are required to wear to work are not allowable as a deduction as the expense is considered to be private in nature.

Make-up and Personal grooming

For expenditure by an employee to be deductible under section 8-1 of the ITAA 1997 the High Court of Australia has indicated that the expenditure must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense ( Lunney v. FC of T (1958) 100 CLR 478 at 497-498). 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 (Ronpibon Tin NL v. FC of T (1949) 78 CLR 47). Consequently, it is necessary to determine the connection between the particular outgoing and the operations by which the taxpayer more directly gains or produces his or her assessable income ( Charles Moore and Co (WA) Pty Ltd v. FC of T (1956) 95 CLR 344 at 349-353; FC of T v. Cooper 91 ATC 4396 at 4403; (1991) 21 ATR 1616 at 1624; Roads and Traffic Authority of NSW v. FC of T 93 ATC 4508 at 4521; (1993) 26 ATR 76 at 91). 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 cosmetics and personal grooming and the derivation of income by an employee taxpayer, and the expenditure will be private in nature.

The Commissioner's view on cosmetics and personal grooming expenses incurred as a requirement of one's employment is contained in Taxation Ruling TR 96/18 Income tax: cosmetics and other personal grooming expenses.

Paragraph 10 of TR 96/18 explains that the decision in Mansfield v. FC of T 96 ATC 4001; 31 ATR 367 (Mansfield's Case), which concerned a flight attendant, confirmed that expenditure on hairdressing and make-up is essentially of a non-deductible private nature. The fact that an allowance for grooming was paid and that the employer required its employees to be well groomed, did not alter the private nature of the expenses.

Paragraph 6 of TR 96/18 does allow for some circumstances in which cosmetics may be claimed as a work expense. These circumstances prescribe that there must be a significant connection between the expense incurred and income earning activity. For example, performing artists may claim some stage make up for performing a role or those who work in harsh conditions may be able to claim expenses relating to rehydrating moisturiser and rehydrating hair conditioner.

Further, in Mansfield's Case Justice Hill stated, “Even if makeup as such is required by the airline as an incident of the employment, I am presently of the view that makeup retains an essential personal characteristic which excludes it from deductibility.”

In your case you do not work in an environment with harsh conditions, as would be present on an airplane for example. Furthermore, your work is not that of a stage performer, requiring specialised makeup. Therefore the makeup expense you have incurred will retain the essential personal characteristics and would be excluded from deductibility.

In Mansfield's case, the Court also considered claims for hair spray, styling, cutting, conditioner applied by the hairdresser, conditioner applied at home, shampooing at the hairdresser and shampoo purchased for use at home. The Court allowed a deduction for the additional cost of rehydrating conditioner necessitated by the lack of humidity in the pressurised environment of the aircraft cabin, but found the remaining expenditure on hairdressing was not deductible. When considering the non-deductibility of hairdressing expenditure, Mr Justice Hill stated (ATC at 4009; ATR at 376):

'The fact that Mrs Mansfield was required by her employer to be well groomed and presentable does not of itself operate to confer deductibility. Expenditure on hairdressing is of a private nature. There is no additional feature which shows any relationship between the expenditure on the one hand and Mrs Mansfield's employment as a flight attendant. The expenditure does not have the character of employment related expenditure and in my view is not deductible. Her selection of a perm, which requires somewhat regular maintenance, is her choice. It is not occasioned by her employment.'

In your case you colour your hair, which then requires maintenance with a hair regrowth product. This is a personal choice that is not occasioned by your employment. Any expenditure on hairdressing is of a private nature and not an allowable work related deduction. It is therefore considered that the expenditure you have incurred on make-up and hair regrowth product is private expenditure and you are not entitled to a deduction under section 8-1 of the ITAA 1997.