Assistant Commissioner Kath Anderson said: "We have seen claims for clothing and laundry expenses increase around 20 per cent over the last five years. While this increase isn't a sign that all of these taxpayers are doing the wrong thing, it is giving us a reason to pay extra attention," she said.
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.
"I 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. 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 it is a myth that taxpayers can claim a standard deduction of $150 without spending money on appropriate clothing or laundry. 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.
"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."
Ms Anderson said there are three golden rules to follow which will help taxpayers to get their deductions right.
"One – you have to have spent the money yourself and can't have been reimbursed, two – the claim must be directly related to earning your income, and three – you need a record to prove it," she said.
"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. For more information about work-related expenses, visit http://ato.gov.au/deductions.
The following are Case Studies of actual taxpayers being 'caught out' by the ATO.
Case Study 1: Not up to standards
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 tax agent advised that the claim was a 'standard claim of $150' and could not provide any supporting evidence. The 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.
Case Study 2: Taxpayer can't sell her claims
A sales consultant made claims for workrelated car, clothing and other expenses. She claimed more than $3,000 for work-related clothing, but said she realised her suits did not have a logo after the ATO contacted her. The claim was disallowed because her clothing was not a distinctive uniform or specific to her occupation.
She was also unable to confirm she was required to use her car for work and requested that the ATO not contact her employer, and couldn't provide evidence for her claim, so the ATO disallowed over $6,000 in work-related car expenses.
The consultant also claimed 'other work related expenses' related to food consumed in the workplace by customers and colleagues, and gifts given to customers and colleagues, including underwear, toiletries and a shoe rack.
The ATO disallowed these claims as well, because she could not prove she needed to incur these expenses to earn her income.
In the end, the consultant had to pay back over $8,000 in tax and received a penalty for being reckless in preparing her return.
Ref: ATO media release ('Pull up your socks, but don't claim them'), 19 July 2017.
