Clothes need to be occupation-specific, protective or unique to the organisation to count as deductions. (Flickr: teegardin)
Are you about to submit your tax return? You might want to double check what clothing expenses you are claiming, or you could be paying back a whole lot more.
With 6.3 million Australians lodging clothes and laundry claims last year, this tax time the Australian Tax Office (ATO) is paying special attention to them.
Totalling $1.8 billion, it was a 20 per cent increase over the past five years.
ATO assistant commissioner Kath Anderson said common mistakes include ineligible clothing, claiming for something without having spent the money, and not being able to explain the basis of how the claim was calculated.
And it seems the common idea you can claim a standard deduction of $150, without spending money on appropriate clothing and laundry, is a myth.
“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.
She said while record keeping requirements for laundry expenses are relaxed for claims up to this threshold, taxpayers did need to show how they calculated it.
For clothes to be eligible they must be occupation-specific clothing, protective clothing or a uniform that is unique to the organisation you work for, not simply a dress or colour code your employer tells you to wear.
Getting caught out could cost you more
A consultant was forced to pay back $8,000 in tax plus a penalty after she was “reckless” in preparing her return.
One of her claims was for $3,000 in work-related clothing, but when contacted by the ATO she realised her suits did not have a logo, so are not classed at a distinctive uniform.
A public servant also had her $150 claim for work-related clothing, laundry and dry cleaning rejected, because she could not provide evidence she was required to wear occupation-specific clothing or had spent the money she was claiming as a deduction.
Ms Anderson said she had even heard of a sales assistant telling a taxpayer they could claim a deduction for the clothing if they wore it to work.
“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.
Ms Anderson has three golden rules to make sure you get it right.
“One — you have to have spend 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.