ATO advises pull up tax socks, don't claim them
BE careful what you claim when it comes to clothing items as the Australian Taxation Office is increasing attention, scrutiny and education on work-related expenses this tax time.
According to the ATO, just because you wear an item of clothing to work does not mean you can claim the cost of its purchase and cleaning.
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% over the last five years," she said.
"While this increase is not a sign that all of these taxpayers are doing the wrong thing, it is giving us a reason to pay extra attention."
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.
"We 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 (as) 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."
Ms Anderson said for 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 it is a myth that you can claim a standard deduction of $150 without spending money on appropriate clothing or laundry (and) 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.
Previously 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," she said.
Ms Anderson said there are three golden rules to follow which will help taxpayers to get their deductions right.
1) You have to have spent the money yourself and cannot have been reimbursed.
2) The claim must be directly related to earning your income'
3) You need a record to prove it.
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 cannot claim.
The ATO rleates one claim where a public servant made a number of claims including $150 for work-related clothing, laundry and dry-cleaning.
When reviewing her claim, the ATO 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. T
he 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.
If you use an agent, you are still responsible for making sure your deductions are correct.