Laundry claims are up with almost half of taxpayers making a claim last year and so the ATO is taking a closer look this tax time. To quote the Assistant Commissioner, Kath Anderson, “…we don’t think that half of all taxpayers would have been required to wear uniforms, protective clothing, or occupation-specific clothing.”
That’s right, the ATO believes a lot of taxpayers are either making mistakes or deliberately over-claiming. Common mistakes 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.
“Around a quarter of all clothing and laundry claims were exactly $150, which is the threshold that requires taxpayers to keep detailed records. We are concerned that some taxpayers think they are entitled to claim $150 as a ‘standard deduction’ or a ‘safe amount’, even if they don’t meet the clothing and laundry requirements,” Ms Anderson said.
Conventional clothing is firmly in the ATO sights this year. “Many taxpayers do wear uniforms, occupation-specific or protective clothing and have legitimate claims. However, far too many are claiming for normal clothing, such as a suit or black pants. Some people think they can claim normal clothes because their boss told them to wear a certain colour, or items from the latest fashion clothing line. Others think they can claim normal clothes because they bought them just to wear to work.
“Unfortunately they are all wrong – you can’t claim a deduction for normal clothing, even if your employer requires you to wear it, or you only wear it to work”.
Here’s the bottom line: Taxpayers who can’t substantiate their claims should expect to have them refused and may be penalised for failing to take reasonable care when submitting their tax return.
Clothing claims hung out to dry
I must confess, I usually enjoy reading real-life case studies far too much. Often I feel sympathy for the taxpayer, though there is almost always a true gem or two in there where you are left wondering, ‘What in the heck were they thinking?’ (as in our car detailer below).
Incorrectly claiming for plain clothing
An advertising manager claimed $1854 for clothing and laundry expenses. Her claim was for clothing purchased at popular fashion retail stores.
When the ATO contacted her, she said she represented her company at work functions and awards nights and was required to dress a certain way.
Of course, expenses for conventional clothing are not deductible, even if you are required to wear them for work, and/or only wear them for work. The taxpayer’s clothing and laundry claim was disallowed in full, and a penalty for failing to take reasonable care was applied.
Unreasonable calculation of laundry claim
A car detailer claimed work-related laundry expenses of over $20,000 per year over two years.
When questioned, the taxpayer told the ATO he worked out the laundry expense at the rate of $227 per hour, as he valued his personal time (he’s ballsy, I give him that!). He then made a voluntary disclosure that his claim was excessively high and in no way a reasonable amount to claim.
The taxpayer’s claims were reduced to $0 in accordance with his voluntary disclosure. As he made a voluntary disclosure before our audit progressed, no penalties were applied.
A lab technician claimed $2500 for the cost of purchasing protective boots and laundering his work uniform.
He advised he had a very dirty job and mostly washed his clothes at the laundromat for around $9 a wash and $3 for drying. Unfortunately, he did not keep any receipts so the ATO could not verify his claim.
They reduced his claim for laundering his work uniform to $144, using the ATO’s reasonable basis.
If you want to claim the cost of cleaning your eligible work clothes, you need to keep receipts for amounts greater than $150. You can use a reasonable basis for claims up to $150
What’s ‘reasonable’? How to calculate your laundry claim
Make sure your claim is for eligible clothing (occupation-specific, protective or uniform). Remember, you can’t claim for plain or conventional clothing, even if your employer requires you to wear it and even if you only wear it to work.
Calculate your claim for washing, drying and ironing at:
- $1 per load if the load is made up only of work-related clothing
- 50c per load if you include other laundry items
Keep in mind that you may be asked to demonstrate how often you wore your eligible clothing (eg. evidence that you worked three shifts a week for 48 weeks in a year).
What can taxpayers legitimately claim?
Taxpayers can legitimately claim work-related clothing and laundry if they were required to wear either a uniform that’s unique and distinct to their employer, protective or occupation-specific clothing.
Occupation-specific clothing is something that clearly identifies you as being in that occupation, like a chef’s checked pants.
Protective clothing includes things like high-vis vests, steel capped boots or overall or aprons that protect your normal clothes.
But you can’t claim everyday items you wear that might offer you some protection – like closed in shoes.
A uniform clearly identifies you as being part of a particular organisation. If you are unsure, check at the ATO website or with your tax agent.
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