It’s one of the great tax time myths: that workers can claim an automatic work-related clothing deduction of $150.
Also read: 6 things the ATO is scrutinising this year
And according to the Australian Tax Office, millions are caught out every year. In 2018, 6 million attempted to claim the deduction, worth around $1.5 billion.
“You must have spent the money you are claiming on buying or cleaning eligible clothes. While you don’t need receipts for claims up to $150, we can ask how you calculated your claim. We may even ask your employer if you have a required uniform,” assistant commissioner Karen Foat said.
This year, the rules still apply but will attract even greater scrutiny.
“They’re looking at work-related expenses. A lot of things that people would normally have claimed in the past like using your car for work, work-related laundry -the ATO is expecting that to flow through to some lower deduction claims in those spaces. So if your claims have not gone down, that will trigger a bit of interest,” H&R Block communications director Mark Chapman said.
Okay, what are the clothing deduction rules?
Generally speaking, the ATO will require that you have written evidence that you purchased the clothing or had to pay cleaning costs if the amount you’re attempting to claim on clothing expenses is more than $150.
But the tax office is clear: that doesn’t mean you can automatically claim it, and you also need to be careful in what you claim.
“You may receive an allowance from your employer for clothing, uniforms, laundry or dry-cleaning. If you do, make sure you show the amount of the allowance on your tax return as it is assessable income. You can only claim a deduction for the amount you actually spent,” an information sheet explains.
And your clothes need to be required for your job. That means new black heels, or a nice tie won’t make the cut. But checkered pants for chefs, and high vis clothing for tradies will, provided the worker was required to pay for the clothing and was not reimbursed.
The ATO has this regular rule: if your clothing allows the public to “easily recognise your occupation”, and you paid for it yourself, you can claim it.
“You can claim a deduction for shoes, socks and stockings where they are an essential part of a distinctive, compulsory uniform, and where their characteristics (colour, style and type) are specified in your employer's uniform policy,” the ATO said.
“You can claim a deduction for a single item of distinctive clothing, such as a jumper, if it's compulsory for you to wear it at work.”
However, if you’re a retail or hospitality worker whose boss requires you wear a black top and pants, you won’t be able to claim this, as the ATO considers this conventional clothing.
And if you work in retail and your boss makes you wear the latest trends, that’s not eligible. And worse - it’s actually illegal for your boss to force you to spend money in store.
When it comes to claiming laundry, the ATO accepts, as a general rule, $1 per load if it’s just work-related clothing, and 50 cents per load if other clothes are being washed.
One big change
But coronavirus will see one particular claim surge, the ATO has said.
“This tax time, the ATO expects to see a substantial increase in people claiming deductions for working from home or for protective items required for work,” Foat said.
“Taxpayers working in jobs that require physical contact or close proximity with customers or clients during COVID-19 measures may be able to claim a deduction for items such as gloves, face masks, sanitiser or anti-bacterial spray if they have paid for the items and not been reimbursed.”