Posts Tagged ‘Work Related Expenses’

Last week we looked at work clothing, whereby a uniform may be compulsory or non compulsory. With compulsory uniforms you can claim the cost of buying and maintaining those uniforms. With non compulsory uniforms each case is treated on its merits.

Protective clothing is different in that in the main it is tax deductible, an example would be steel capped boots or wet weather gear worn when using chemicals or high pressure hoses. Sun glasses, sun screen and hats are protective clothing for outdoor workers and other taxpayers required to spend part of their day out of the office. The ATO have advised that drill trousers, shorts, shirts and conventional footwear such as sports shoes and joggers are not considered protective clothing, they are of a private nature.

Protective clothing is the clothing and footwear that you wear to protect yourself from the risk of illness or injury posed by your income earning activities or the environment in which you are required to carry them out. To be considered protective the items must provide a sufficient degree of protection against that risk. Examples of protective clothing include: fire resistant and sun protective clothing; safety coloured vests; non slip nurses shoes; rubber boots for concreters; steel capped boots; gloves; overalls; and heavy duty shirts and trousers.

The tax office also considers that dust coats, smocks and aprons you wear to avoid damage or soiling to your ordinary clothes during the course of your income earning activities to be protective clothing. Ordinary clothes such as jeans, drill shirts and shorts, trousers and socks that lack protective qualities designed for the risks of your work are not protective clothing.

I often have clients ask about claiming for the purchase of clothing that must be purchased as a condition of employment. This usually occurs when someone works for a fashion boutique, whereby the sales staff must purchase their clothing from that shop and this is part of the employers advertising campaign. “My staff wear these clothes so they must be good” type of exercise. The fact that the staff would not be seen dead in that type of garment outside of the shop is irrelevant. The employer in some cases encourages the employee by offering a discount on the clothing purchase. I have been told that the generous employers offer a 55 discount. (wow). Unfortunately, the purchase and laundering of these clothes is not a tax deduction.

For more information about claiming a deduction for expenses associated with your work related clothing you could refer to Tax Rulings TR 94/22; TR 97/12; TR 2003/13 and tax determination TD 1999/62. Reading of these publications is also a cure for insomnia.

The tax Office has gone to print in order to assist taxpayers in identifying what is or is not Work Clothing. This is an attempt to guide taxpayers and to take the guess work out of claiming legitimate expenses in tax returns.

Work Uniforms can either be compulsory or non compulsory. If the uniform is compulsory then you may be able to claim for a single item of distinctive clothing such as a jumper, if it is compulsory for you to wear it at work. You cannot claim expenses incurred for non compulsory work uniforms, unless your employer has registered the design with Ausindustry. Check with your employer who should be able to confirm this information for corporate wear at www.ausindustry.gov.au. Shoes, sock and stockings can never form part of a non compulsory work uniform, and neither can a single item such as a jumper.

Generally, you cannot claim a deduction for the cost of purchasing or cleaning a plain uniform or conventional clothing worn at work, even if your employer tells you to wear them, as this is deemed a private expense.

According to the ATO, if you receive an allowance from your employer for clothing, uniforms, laundry or dry cleaning you cannot automatically claim a deduction. Clothing expenses you can claim are related to compulsory uniforms comprising a set of clothing that, when worn, identifies you as an employee of a specific organisation having a strictly enforced policy that makes it compulsory for you to wear the uniform whilst at work.

You may be able to claim a deduction for shoes, socks and stockings where they are an essential part of this distinctive compulsory uniform, the characteristic of which are stated in your employer’s uniform policy.

You may also claim for a single item of distinctive clothing, such as a jumper, where it is compulsory for you to wear it at work. Generally clothing is distinctive where it has the employer’s logo permanently attached and the clothing is not available to the general public.

If you wear a non compulsory uniform you cannot claim for stockings, short socks or shoes as these items cannot be registered as part of a non compulsory uniform. Your employer can tell you if your uniform or wardrobe is registered. If your employer requires you to wear a distinctive uniform or wardrobe, but does not enforce the wearing of the uniform, the design of the uniform must be registered before you can claim a deduction.

You can claim a deduction for the cost of occupation specific clothing, eg checked pants worn by chefs. The clothing would be specific to your occupation and is not everyday in nature. It is unlikely that a building worker would have occupation specific clothing.

More next week on protective clothing.

Taxpayers can claim deductions for work related expenses (WRE) incurred while performing their job. You can incur a work related expense when you receive a bill or invoice for an expense that you are liable for and must pay or you receive a good or service and pay for it. The fact that you have not yet paid for the goods does not stop you claiming a tax deduction in the year the debt was incurred. WRE’s include travel, protective clothing, laundry, telephone, self education, union fees, reference material, depreciation of tools of trade, income protection insurance, etc.

The basic rules associated with work related expenses are: (a) you must have incurred the expense in the current tax year; (b) you cannot claim an expense that your employer (or any other person) has or will reimburse for you; (c) you must have incurred the expense in the course of earning your assessable income and (d) it must not be private, domestic or capital in nature. For example, for most people, travel to & from work each day is private expenditure and not tax deductible.

You must have written evidence to prove your claims if your total claims exceed $300, the records you keep must prove the total amount, not just the amount over $300.

The $300 limit does not apply to claims for car, meal allowance, award transport payments allowance and travel allowance expenses. There are special written evidence rules for these claims which are explained on the ATO Website. If the amount you are claiming is less than $300.00 you need to be able to show how you arrived at that figure but you do not need written evidence ie receipts, bank statements, etc. The ATO advise that it is best if you retain all receipts so that in the event of you claiming more than the $300.00 you can justify the full claim.

Many taxpayers believe that they are entitled to a tax deduction of $300.00 whether or not they have actually spent anything.  This is totally wrong. The only tax deduction available is one whereby the taxpayer has actually incurred an expense or paid for one. Aligned with this is the fact that the expense must be related to the earning if income.

You can claim to $300 without receipts, but once your total deduction for WRE exceeds $300 you must have receipts for everything you are claiming. So if you pay $400 Union fees and spend $25 on a work related item, you must retain that $25 receipt.

Generally, tax deductions for work related expenses are similar irrespective of the occupation undertaken, whether you are a building worker, teacher, truck driver, nurse, shop assistant or defence force member. No matter what the occupation, you may be able to claim for work related travel, protective clothing or uniforms, reference material, tools of trade, self education expenses and overtime meal allowances. I say ‘you may be able to’ because although you are required to spend money in order to work, the Tax Office does not see that spending as being an integral part of earning your income.

In the coming weeks we will look at specific deductions.

Did you know… every year the ATO issues a list of occupations that they will monitor for audit purposes, without fail the poor dedicated teacher is targeted. In this article we will outline some do’s and don’ts when preparing your tax return.

If you are an employee teacher, tutor, early childhood, primary, secondary, special education, technical and further education (TAFE) or relief teacher, some of the deductions you may be able to claim and others that are not claimable are identified below.

Clothing that is used to protect your other clothes (apron/lab coat, steel capped boots), and specific uniforms may be deductible. Other items to consider if your work requires you to work outside include; hats, sunglasses and sunscreen. No deduction is available for items such as plain tracksuits or joggers even if you are a physical education teacher. Laundry costs are generally only available where a deduction for clothing is allowable.

Cost of excursions, school trips/camps are deductible if these have an educational benefit and are related to the curriculum or extra curriculum of the school – unfortunately no deduction is available for teachers attending school functions or social dinners. You can also claim teaching aids used for work, this does not include gifts to students or items bought for a single student. The item needs to be used as a teaching aide for all students.

Education expenses relating to your occupation are deductible. These are the costs you incur in attending seminars, conferences, education workshops or training courses. As well as relevant courses held by a college, university or other place of education. Self-education expenses can include textbooks, stationery, student union fees, course fees; certain travel expenses and the decline in value of equipment to the extent that they are used for self-education purposes. In certain circumstances you may have to reduce your deduction for self-education expenses by $250.

Motor vehicle and travel expenses can be claimed for allowable travel by a teacher say to attend seminars or courses relating to employment, there are four ways you can  work out your motor vehicle deduction, please refer to the ATO website for further information (or ask us when you next visit).

Other items you may be able to claim a deduction for include;

• First aid courses, provided you are a designated first aid person.
• Home office expenses relating to running a home office that is used to help you produce your income.
• Answering machines, mobile phones, pagers, calculators, electronic organizers and
• dedicated stop watches (not ordinary wrist watches) including the cost of purchase or depreciation, repairs and batteries.
• Allowable meal deductions
• Interest on monies used to purchase work related equipment, telephone costs
• Professional library, Technical and professional publications but not newspapers
• Union and subscription costs relating to your work.

When can you claim a deduction for work related clothing? This area seems to cause some confusion and here we hope to clear this up.
 
Compulsory Uniforms

As stated by the ATO ‘You can claim the cost of buying, renting, repairing and cleaning occupation-specific clothing, protective clothing and certain work uniforms.

You cannot claim the cost of purchasing or cleaning a plain uniform or clothes you bought to wear for work that are not protective or specific to your occupation even if your employer tells you to wear them – for example, a bartender’s black trousers and white shirt or a manager’s suit or stockings.’

A deduction is allowable where the wearing of uniform or specific clothing is compulsory and the clothing readily identifies a particular organisation with the use of such things as logos, initials, insignias on buttons or pockets. These should be of a sufficient size to be clearly visible to the observer. Clothing is unique when it has been designed and made for only one employer and is not available to the public. You may be able to claim a deduction for shoes, socks and stockings where they are compulsory and an essential part of the distinctive uniform which is specified in your employer’s uniform policy.

Specific Clothing
This is clothing that is specific to your occupation and would allow the public to easily recognise your occupation – for example, the checked pants a chef wears.

Protective clothing
Clothing that provides a sufficient degree of protection against risk of injury or illness that may be encountered during your duties at work are claimable. Examples of these include steel capped boots, gloves, safety coloured vests, fire resistant and sun protection clothing, non-slip nurse’s shoes, heavy duty shirts and trousers.

Overalls, aprons and other clothing worn so as not to damage or soil your normal clothes is also considered protective. Keep in mind jeans and other clothing that offer no extra protective qualities are not considered protective clothing.

Non Compulsory Work Clothes

You cannot claim expenses incurred for non-compulsory work uniforms unless your employer has registered the design with AusIndustry – if you are unsure check with your employer or go to www.ausindustry.gov.au.

Remember shoes, socks and stockings or single items of clothing can never form part of a non-compulsory work uniform.

Laundry

Where a deduction for work clothing is allowable you will generally be able to claim the cost of laundry. You may use a reasonable basis to work out your claim if it does not exceed $150. The ATO considers reasonable $1 per load, including washing, drying and ironing if no other clothes are included in the wash. Where other clothes are in the wash the rate is reduced to 50 cents.

Allowances

You cannot automatically claim a deduction simply because you received a uniform, clothing, laundry or dry-cleaning allowance from your employer.