The Australian Tax Office (ATO) is cracking down on work related clothing and laundry expenses this financial year. These expenses will be examined closely, especially for taxpayers whose claims don’t match the criteria, due to an increasing amount of claims in this area.
According to ATO data clothing claims have been up nearly 20% over the last five years. This increase has led the ATO to believe a lot of taxpayers are either making mistakes or deliberately over claiming. 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 are common mistakes people are making.
“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.
The $150 threshold where taxpayers are not required to keep detailed records seems to have become an area where people are feeling “entitled” to claim. “Around a quarter of all clothing and laundry claims were exactly $15o, 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.
“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”.
With the standards of technology continually improving in the way the ATO scrutinises returns, it is being strongly advised that taxpayers do not claim for even small amounts they are not entitled to.
Ms Anderson said there are three golden rules to follow which will help taxpayers to get their deductions right:
- You must have spent the money yourself and can’t have been reimbursed
- The claim must be directly related to earning your income
- You need a record to prove it
The ATO has warned if you can’t substantiate your claim you should expect to have it refused and may be penalised for filing to take reasonable care when submitting your tax return.
If you would like further clarification on what you can claim and the best way to do this, please contact our office on (02)4353 2333. You can also refer to our Blog on “work related deduction tips”