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  • Pull up your socks, but don't claim them

    The Australian Taxation Office (ATO) is increasing attention, scrutiny and education on work-related expenses this tax time.

    Assistant Commissioner Kath Anderson said that last year over 6.3 million people made a work-related expense claim for clothing and laundry expenses, totalling almost $1.8 billion.

    “We have seen claims for clothing and laundry expenses increase around 20 per cent over the last five years. While this increase isn’t a sign that all of these taxpayers are doing the wrong thing, it is giving us a reason to pay extra attention,” she said.

    Ms Anderson said common mistakes the ATO has seen 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.

    “I heard a story recently about a taxpayer purchasing everyday clothes who was told by the sales assistant that they could claim a deduction for the clothing if they also wore them to work,” Ms Anderson said.

    “This is not the case. You can’t claim a deduction for everyday clothing you bought to wear to work, even if your employer tells you to wear a certain colour or you have a dress code,” she said.

    “For your clothing to be eligible for a deduction, it needs to be occupation-specific clothing, protective clothing or a uniform that is unique to the organisation you work for,” she said.

    Ms Anderson said it is a myth that you can claim a standard deduction of $150 without spending money on appropriate clothing or laundry. She said that while record keeping requirements for laundry expenses are relaxed for claims up to this threshold, taxpayers do need to be able to show how they calculated their deduction.

    “Over 1.6 million taxpayers claim a deduction of exactly $150. We expect many of these claims to be legitimate but the results of our random audits show that people are making mistakes.”

    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,” she said.

    “The myDeductions tool in the ATO app is also a great way to make keeping records for your deductions easier. If you start using it now, next tax time will be a breeze because you can send your deductions to your tax agent or upload them directly to myTax.”

    It is important to remember, whether you lodge your own tax return or go to an agent, you need to be aware of what you can and can’t claim. If you use an agent, you are still responsible for making sure your deductions are correct.

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

    Caught out claims

    Case Study: Not up to standards

    We saw that a public servant made a number of claims including $150 for work-related clothing, laundry and dry-cleaning. When reviewing her claim, we asked for details of the expenses, including a letter from her employer confirming she needed to wear occupation-specific clothing or a uniform, details of how the laundry cost was calculated, and records to support her other expenses.

    The public servant’s agent advised that the claim was a ‘standard claim of $150’ and could not provide any supporting evidence. The claim was disallowed in full because there was no indication the public servant was required to wear a uniform or had spent the money she was claiming as a deduction.

    Case Study: Taxpayer can’t sell her claims

    A sales consultant made claims for work-related car, clothing and other expenses. She claimed more than $3,000 for work-related clothing, but said she realised her suits did not have a logo after we contacted her. The claim was disallowed because her clothing was not a distinctive uniform or specific to her occupation.

    She was also unable to confirm she was required to use her car for work and requested that we did not contact her employer, and couldn’t provide evidence for her claim, so we disallowed over $6,000 in work-related car expenses.

    The consultant also claimed ‘other work-related expenses’ related to food consumed in the workplace by customers and colleagues, and gifts given to customers and colleagues, including underwear, toiletries and a shoe rack. We disallowed these claims as well, because she could not prove she needed to incur these expenses to earn her income.

    In the end, the consultant had to pay back over $8,000 in tax and received a penalty for being reckless in preparing her return.

    Last modified: 19 Jul 2017QC 52929