Does your job require you to wear a suit for professionalism, or a uniform that displays the company logo, or in the case you work in a clothing store – is it obligatory that you purchase your work clothes from your store of work? Many small businesses require that their employees wear a work uniform, and other businesses impose a specific dress code. As an employee, if you have to spend money on work-related expenses, you may be eligible for a tax deduction.
However, if you choose to purchase expensive clothing to comply with your company dress code, it does not always mean you can claim a tax deduction for your work clothes. The Australian Tax Office allows you to receive a tax deduction on work clothes and uniforms if you satisfy a number of requirements, that are specific to your occupation and aren’t everyday attire. To claim a work clothes tax deduction, you will always need to provide the right evidence that you purchased the correct clothing that adheres to your role and has evidence of cleaning costs. If you provide your employees with an allowance – or you receive an allowance from your employer, you need to state the amount of the allowance for work clothes when completing tax returns.
Clothing deduction requirements
Clothing that is specifically not related to your employment treated as a private expense. And also required for your taxable income. Whatever the situation is for your and your business, employees need to conform to the employer’s dress policy to be eligible to receive tax deductions for work clothes.
To receive the tax deduction for work clothes and the expense of cleaning them, employers must document that they require you to wear specific clothing as a condition of your employment. The ATO also requires that the clothing is not appropriate for personal wear. This means that you cannot claim things like a business suit, black pants, jeans, or white shirts. If, however, an employer requires the white shirt to feature the business logo, you can then deduct the cost. One of the biggest mistakes employees make with trying to complete their tax deduction for work clothes, is trying to claim a deduction for ordinary clothing they bought for work.
The ATO has stated, that in the case of an audit, you should be able to provide evidence on how your laundry expenses are calculated, why you need to wear specific clothing for work, and how your tax deduction to figure was calculated. Claims for under $150 are not required to keep records, you need to show how this was calculated. Interestingly, the ATO has discovered that over 1.6 million taxpayers claim a deduction of exactly $150. ATO Assistant Commissioner Kath Anderson stated, “We expect many of these claims to be legitimate but the results of our random audits show that people are making mistakes.” In addition, when it comes to cleaning expenses (washing, drying, and ironing), the ATO considers $1 per load is reasonable, or 50c per load if you included your personal items.
To assist you in adhering to the Australian Taxation Office policies, and make the out of your tax deductions for work clothes, we have put together a guide that outlines what you can and can’t claim. Firstly, it is important to understand that tax deductions for work clothing must fall into one of four specific categories:
- compulsory work uniform
- non-compulsory work uniform
- occupation-specific clothing
- protective clothing
1. Compulsory work uniform
A compulsory work uniform is required to perform your role as an employee. It is a strictly enforced policy while you’re at work.
You may be able to claim a tax 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. Often, employers have specially designed uniforms that employees must wear every time they are at work. Examples of this include airline flight attendants, fast-food chain employees, supermarket employees.
If your employer does not reimburse you for the expense of purchasing your work uniform. And also do not provide a laundry allowance as part of your wages. Then you may be eligible to receive a tax deduction for work clothes and all uniform related expenses.
Additionally, you may be able to receive a tax deduction for shoes, socks, and stockings. If they are an essential part of your distinctive compulsory uniform.
2. Non-compulsory work uniform
You cannot claim expenses or receive a tax deduction for work clothes. If it is for non-compulsory work uniforms unless the business has registered the design with AusIndustry. The only way to claim for a non-compulsory uniform is if the uniform is unique. And also distinctive to the organisation you work for. For the clothing to be unique, it is designed and produced by the employer. It has the company logo attached and the clothing is not available to the general public.
If the uniform is generic clothing that can also be used for personal use. Then you are unable to receive a tax deduction for work clothes.
3. Occupation-specific clothing
Come occupations require specific clothing that isn’t in everyday nature. And also allows the general public to recognise an occupation even though it is not their official uniform. Some examples include nurse’s and doctors’ scrubs, factory worker’s hairnets, or a chef’s chequered trousers. The clothing that is specific to your occupation can be eligible for a tax deduction for work clothes.
In relation to claiming the cost of laundering occupation-specific clothing. Employees may be able to claim laundry expenses for occupation-specific clothing if they are compulsory to their occupation. However, it is best to review the occupation and industry-specific guides to correctly claim your tax deductions for work clothes.
4. Protective clothing
Clothing and footwear that protects employees from the risk of illness or injury are eligible to receive tax deductions for work clothes. You can claim the cost of purchasing and maintaining your protective clothing. Ordinary clothing that does not provide you with protective qualities. They are not classified at protective clothing and are not eligible for tax deductions. For the items of clothing to be considered protective clothing, they must provide protection. Examples of protective clothing that can be used as a tax deduction for work clothes. This includes fire-resistant and sun-protection clothing, steel-capped boots, personal protective equipment, or high visibility clothing. Also rubber boots, non-slip nurse’s shoes, safety-colored vests, fire-resistant, and sun-protection clothing, gloves, overalls, and heavy-duty shirts and trousers.
You can claim a tax deduction for work clothes if your protective gear falls into one of the eligible protective clothing categories. If you’re unsure about tax deductions for work clothes, or if you prefer outsourcing all your tax needs – give us a call at our Eastern Suburbs tax accountant practice. We work effortlessly to understand and simplify all the taxable deductions that your business can be eligible for. Our aim is to help you focus on your business while you leave the boring tax stuff to us. We want you to have the confidence to run your business while our tax experts work on ensuring you are up-to-date with your tax requirements.