Can you claim tax back on your work wardrobe?

It's that time of year again to get your tax affairs in order - but what areas will the ATO be cracking down on?

Office workers in Brisbane

Office workers in Brisbane. Source: AAP

This year the Australian Tax Office will be closely monitoring work-related clothing and laundry expenses.

That's because there has been a 20 per cent rise in the number of claims over the past five years, taking it to $1.8 billion.

The ATO's Assistant Commissioner Kath Anderson says 6.3 million people claim what they wear to work is tax deductible.

"That's half of all taxpayers claiming clothing and laundry expenses.

"While many of those will be legitimate, we know that some people are making mistakes and that's why it is a focus area for us."

So what can you claim on clothing?

Mark Champan, adviser at tax preparation company H&R Block, says protective clothing is permissible.

"So if someone is working on a construction site and they're wearing steel-capped boots to protect their feet, they're wearing a high-vis vest so they're visible, they may be wearing overalls to protect the clothing they're wearing underneath, or to protect their body, anything like that is going to be claimable."
What you can claim
Source: SBS
He adds that a uniform that is unique and distinct to an employer, or occupational clothing like chefs pants, can also be claimed. 

"What you can't do is claim for conventional clothing. So if you wear a normal business suit, then that's not claimable, if you're working in a restaurant and you're wearing a pair of black trousers then that's not claimable."

The ATO's Ms Anderson said there are some other myths that need to be dispelled.

"They can't claim expenses for normal clothing that they happen to wear to work, even if their boss told them to wear a particular colour or an item from the latest line, or even if they only wear those clothes to work."

Ms Anderson adds that the other mistake many people make is claiming what they believe to be a standard clothing deduction of $150 "even if they're not required to wear a uniform or occupation-specific or protective clothing."

"Last year 1.4 million people claimed exactly $150. Many of those will be legitimate but we know that some people are claiming a standard deduction or a safe amount. Just to be clear, the $150 is there to ease recordkeeping, it's not an automatic entitlement for everybody."

Read more about claiming clothing, laundry and dry-cleaning expenses at ato.gov.au

What else is the ATO watching?

Elsewhere, cryptocurrencies like Bitcoin, are also on the ATO's watchlist.

"The tax office views cryptocurrency as an asset," Ms Anderson said.

"So that means if you bought and sold, or otherwise disposed of your cryptocurrency, there will be tax implications, and in particular, if you've got a capital gain you need to include it in your tax return."
Ms Anderson also notes that the rise of the gig economy, including ride-sharing and room-letting services - also has the ATO's attention.

"The gig economy is a great way to make some extra income, but you need to remember that you also need to declare that income on your tax return, just like all your other income and that's the case whether your an employee or contractor."

What if you've lost your receipt?

As for the most common question accountants get asked, Mr Chapman says, it's always to do with deductions.

"Somebody wants to claim a deduction but they've lost the invoice, they've lost the receipt, they can't prove that they've spent the money and the question is, 'can we claim the deduction?'"

"Unfortunately in that case, very often the answer is no."

Ms Anderson is encouraging all taxpayers to seek advice, especially if they're uncertain about what they can and can't claim.

"We've got some pretty sophisticated analytics and access to lots of data," she said. 

"We do scrutinise every return [and] this year we will be increasing our investment, not just in our education and assistance but also in our reviews an audits - so if you're planning to fudge it, just be aware that your chances of getting caught, have just gone up."


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4 min read

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By Ricardo Goncalves



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