The Australian Tax Office (ATO) is cracking down on claims for work-related clothing and laundry expenses this tax time.
Last year total claims for work-related clothing and laundry expenses totalled nearly $1.8 billion. The ATO has acknowledged that many of these claims are legitimate. However, it is unlikely that half of all taxpayers would have been required to wear uniforms, occupation-specific clothing or protective clothing.
The Tax Office is in the view that many taxpayers are either making mistakes or deliberately over-claiming. Common mistakes that are observed include:
– Claiming for something without having spent the money
– Not being able to explain the basis for how the claim was calculated
– Claiming ineligible clothing (eligible clothing is occupation-specific, protective or uniform)
Another concern facing the ATO is the number of claims which totalled exactly $150. This amount is the threshold that requires taxpayers to keep detailed records. The ATO is reminding taxpayers the $150 limit is not an automatic entitlement for everyone; it is in place to reduce recordkeeping burden.
Normal clothing is another deduction under scrutiny. Claiming for normal clothing such as a suit or black pants is not legitimate, even if you only wear it to work, or your employer requires you to wear a particular colour and so on.
The ATO uses sophisticated technology to analyse claims and compare them to other taxpayers in similar occupations and earning similar income.
If a taxpayer cannot substantiate their claim, they should prepare to be refused and potentially face a penalty for failing to take reasonable care when submitting their return.