Edited version of private advice

Authorisation Number: 1051887617088

Date of advice: 19 August 2021

Ruling

Subject: Deduction - conventional clothing

Question

Under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), can you claim a deduction for the expenses incurred in acquiring conventional clothing?

Answer

No.

Further Information to Consider

This private ruling solely relates to the deduction of conventional clothing and no other matter/s have been considered. This private ruling is based on the relevant facts and circumstance provided. This ruling does not consider whether you are running a business. Further information regarding running a business, visit ato.gov.au and search for 'QC 31733'.

This ruling applies for the following periods:

Year ended DD MM YYYY

The scheme commences on:

DD MM YYYY

Relevant facts and circumstances

You are running a business as a lifestyle influencer.

You earn assessable income from various activities including interviews, fashion magazines and social events.

You are expected to dress in a manner that is consistent with the business brand and your public image.

You incur expenses in having conventional clothing made to order and worn during interviews, for print media and at various events.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for Decision

Summary

You are not entitled to claim a deduction for the expenses incurred in acquiring conventional clothing.

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.

Taxation Ruling TR 97/12 Income tax and fringe benefits tax: work related expenses: deductibility of expenses on clothing, uniform and footwear, discusses the Commissioners view on the deductibility of work related clothing, uniform and footwear expenses.

Taxation Ruling TR 97/12 provides that the cost of buying clothing will in most circumstances, be regarded as an expense of a private nature. Clothing is necessary for protection of the body from the elements and to meet societal norms of modesty, fashion or similar conditions.

For expenditure to be deductible, the expenditure must have the essential character of an outgoing incurred in gaining assessable income. It is not sufficient that the expenditure is a prerequisite to the derivation of assessable income; it must contribute to the derivation of that income

The circumstances where expenditure for clothing is considered to be deductible are where the clothing is:

•         occupation specific clothing

•         a compulsory uniform/wardrobe

•         a non-compulsory uniform/wardrobe

•         protective clothing and footwear.

Occupation specific clothing

Occupation specific clothing distinctively identifies the wearer as a person associated with a particular profession, trade, vocation, occupation or calling. It is this distinctive nature of the clothing that provides a nexus between the expenditure and the income earning activities such that the essential character of the expense is work related and not of a private nature. Examples are cleric's ceremonial robes, a barristers robes, a chefs chequered trousers and a nurses traditional uniform.

Compulsory uniform/wardrobe

The essential character of an employee's expenditure on clothing items including shoes, socks, stockings and accessories which form an integral part of a compulsory and distinctive uniform is expenditure directly related to the income producing activities of the employee. It is the compulsory and distinctive characteristics which provide the nexus between the expenditure on the uniform and the work activity. The employer's compulsory uniform policy guidelines should stipulate the characteristics of the colour, style and type of the clothing and accessories that qualify them as being a distinctive part of the compulsory uniform. Also, the wearing of the uniform generally should be strictly and consistently enforced. An example of this being is a flight attendants deduction for purchase of shoes that meets her employers strictly enforced uniform policy that stipulates the characteristics of shoes that she must wear - eg, minimum and maximum requirements for heel height and circumference - you may claim a deduction for the purchase of these shoes

Non-compulsory uniform/wardrobe

A non-compulsory uniform/wardrobe is a set of one or more items of clothing that distinctively identify the wearer as a person associated, directly or indirectly, with an employer.

A deduction is only allowable for a non-compulsory uniform/wardrobe where the design of the uniform/wardrobe has been entered on the Register of Approved Occupational Clothing

Protective clothing and footwear

Taxation Ruling TR 2003/16 provides guidelines on the deductibility of protective items, including footwear used for protection against risk of serious illness or injury. Expenditure on a protective item will have a sufficient connection with the earning of your assessable income where:

•         you are exposed to the risk of illness or injury in the course of carrying out your income earning activities;

•         the risk is not remote or negligible it would be a real risk to anyone who worked where you are required to work;

•         the protective clothing is of a kind that provides protection from that risk and would reasonably be expected to be used in the circumstances; and

•         you use the item in the course of carrying out your income earning activities.

Conventional clothing

Taxation Ruling TR 97/12 also considers the deductibility of conventional clothing. Conventional clothing is 'everyday' clothing that would ordinarily be worn, or which could reasonably be worn, by a person irrespective of whether that person is working or not, for example, a pair of jeans or a shirt.

While there is no universal rule that conventional clothing can never be deductible, in most cases expenditure on conventional clothing will not be deductible. Taxation Ruling TR 97/12 provides that expenditure on conventional clothing is often not an allowable deduction as there is not usually a sufficient connection between the expenditure and the income earning activities of a taxpayer.

Factors that are relevant to the question of whether a sufficient connection exists so that the essential character of the expense is work related rather than private in nature include:

•         express or implied requirements of the employer or business concerning clothing;

•         the extent to which the clothing is distinctive or unique to the nature of the employment or business having regard to particular, special or accepted work clothing requirements, including its availability to be worn by members of the general public;

•         the extent to which the clothing is worn solely for work;

•         the extent to which the clothing is unsuitable for any activity other than work.

A deduction for conventional clothing was allowed in Federal Commissioner of Taxation v. Edwards 94 ATC 4255; 28 ATR 87 (Edward's case). In Edward's case, the taxpayer worked as the personal secretary to the wife of the Governor of Queensland. She sought a deduction for expenses incurred in purchasing hats, gloves and formal gowns which she was required to purchase to fulfil the duties of her position. The taxpayer was expected to dress in a manner compatible with the Governor's wife. It was determined that the additional clothing purchased was over and above the personal requirements of her normal attire for private use.

In Case 48/94 94 ATC 422; AAT Case 9679 (1994) 29 ATR 1077, a self-employed professional presenter and speaker was denied a deduction for the cost of conventional clothing. The taxpayer gave evidence that she maintained a separate wardrobe to meet her work requirements, and that she 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. The taxpayer submitted to the Tribunal that her matter could be paralleled to the facts in Edwards case.

Senior Member Barbour distinguished this case from Edwards case on the basis of the emphasis placed by the Tribunal and Court on Ms Edwards' additional changes of clothes throughout a work day - a fact not present in this one - and found the essential character of the expense to be private, saying (ATC at 427; ATR at 1083):

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

Senior Member Barbour went on to say (ATC at 428; ATR at 1084):

'For it was essential that the applicant wear something to her income-producing activities...the applicant's clothing needed to be suitable for the purpose of wearing to that presentation, but this does not change its character to a business expense, and I find that the nature of the expense is essentially private.'

Whilst the additional nature of the clothing is a relevant factor to be taken into account, it will not be sufficient where the income earning activities do not turn upon the wearing of the additional clothes and where they are not specific and suited only for the income earning activity.

Conclusion

Considering the facts and your circumstances, the made to order clothing may be distinctive to your business brand and public image you are promoting, however the clothing is not consistent with being considered occupation specific, a compulsory uniform/wardrobe, a non-compulsory uniform/wardrobe or protective (clothing and footwear). The made to order clothing has the characteristics of conventional clothing.

When you use conventional clothing at work to promote your image, your expenditure on the clothing in most cases will still be of a private or domestic nature because the essential character of the expenditure is that of meeting personal requirements of modesty, decency and warmth.

Therefore consistent with the principals established in TR 97/12, the expenses incurred in purchasing made to order clothing does not have the essential character of a work related expense.

Accordingly, you are not entitled to a deduction for the cost of purchasing made to order clothing under section 8-1 of the ITAA 1997.