Planning to claim some clothing or laundry expenses this tax time? These deductions are on the ATO's watch list again this year, and there are many traps for the unwary. For example, did you know that non-branded work uniforms are not deductible? Find out what categories are allowed and what records you need to keep.
Taxpayers who claim deductions for work-related clothing and laundry expenses may find themselves under the ATO's microscope this tax time. Even if your claim is relatively small, penalties can apply for making incorrect claims.
If your work-related clothing falls into one of the following three categories, you can claim the purchase cost and the costs of laundering that clothing:
The ATO is particularly concerned that many taxpayers incorrectly claim for ordinary clothing, like suits or black work trousers. It says the following are not valid reasons for deducting clothing:
For total clothing and laundry claims of up to $150, you aren't required to keep detailed records. However, the ATO stresses that taxpayers aren't "automatically" entitled to a $150 deduction – you must have actually incurred the expenses you claim. The ATO can still ask you to substantiate your claim, and can contact your employer to verify its clothing requirements.
If your total claim is under $150, you can calculate your laundry claim using a simple rate of $1 per load where all the clothing is work-related, and 50 cents per load where other clothes are part of the load.
If your total claim for clothing and laundry exceeds $150 (and your total claim for work-related expenses exceeds $300), you'll need to keep receipts.
To prove your laundry costs, you'll need to keep a diary for a representative one-month period. Your adviser can help you ensure you have the correct records in place.
To claim a deduction, you must have incurred the expense yourself. So, if your employer reimburses you for an expense, you can't deduct that amount.
On the other hand, if you receive a clothing allowance you must declare that allowance in your tax return. You can then deduct your costs for eligible clothing, but only the amount you actually spent.
Talk to us for expert assistance with all of your work-related expense claims. We'll help you claim everything you're entitled to, while keeping the ATO happy.
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