The ATO (Australian Taxation Office) has issued a warning that it is scrutinising claims for work-related clothing and laundry expenses. The ATO Assistant Commissioner Kath Anderson stating “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.”
Over the last 5 years, clothing claims have jumped nearly 20%. Occasionally, the ATO will even ask employers if they require their employees to wear a uniform to justify claims. The ATO deems taxpayers are making common errors including:
- Claiming clothing that is unacceptable
- Not buying something but still attempting to make a claim
- Being unable to justify the basis for how the amount of the claim was calculated
One scenario saw work related laundry expenses of $20,000 per year over a 2 year period be attempted to be claimed by a car detailer. It appeared the taxpayer calculated the hours he spent doing his laundry then multiplied that by what he considered to be a fair hourly rate ($227 per hour because he regarded his personal time of high value). Suffice to say, his claim was reduced to $0.
Claims over $150 are to have supporting receipts, however claims below $150 don’t require taxpayers to have records leading the ATO to assume many taxpayers are ticking the box assuming the claim is a standard deduction and it’s not only sizeable businesses they are scrutinising.
“Just to be clear, the $150 limit is there to reduce the record keeping burden, but it is not an automatic entitlement for everyone. 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.
This article was written based on information supplied from Knowledge Shop Newsletter July 2019.
The material and contents provided in this article is of an informative nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.