The federal government is considering scrapping all tax deductions for non-compulsory work uniforms as part of a move to ease the “regulatory burden” of the current system on employers.
A government discussion paper suggests 500,000 Australian employees could lose their tax deductions for non-compulsory work uniforms is the option is adopted, however, interested parties have until mid-December to provide feedback on the proposal.
The “Review of the Register of Approved Occupational Clothing and related tax deductions” paper presents four options on the regulation of tax concessions for non-compulsory work uniforms, which include clothing worn by nurses, office workers, teachers and healthcare workers in the course of their duties.
One of the options on the table is to “deny all tax deductions” for this type of uniform, reports Fairfax. The paper says this route would remove the burden on employers, which are currently are required to submit designs for non-compulsory clothing to the Secretary of the Department of Industry, Innovation and Science for approval.
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The types of occupational clothing covered include attire with logos and branding that is not compulsory to wear but may be encouraged or contribute to the image of a corporate setting or business. The review does not apply to clothing that workers must wear in order to complete their jobs. According to the Australian Tax Office, non-compulsory uniforms do not extend to single pieces of clothing, and instead involve multiple pieces of attire.
“Shoes, socks and stockings can never form part of a non-compulsory work uniform, and neither can a single item such as a jumper,” ATO guidelines state.
The report from the Department of Treasury suggests that $30 million in annual revenue could be saved through the removal of the tax concession, with 300 new applications for non-compulsory uniform designs made each year.
However, David McKellar of Allied Accountants says that 300 figure sounds low, and that some employers may well be encouraging this kind of uniform without registering a design. Employees may only claim a tax deduction for their uniforms if the design has been approved, but this requirement was generally not well known in the business community, McKellar says.
“What I would imagine would happen [if the concession was ended] is that some workplaces will just institute compulsory uniforms,” he told SmartCompany.
According to Treasury’s report, the top claimers for non-compulsory work uniforms are public servants, teachers and bank workers – who could potentially be looking at more compulsory work attire if a change is made, McKellar believes.
“Particularly for workers in smaller offices,” he says.
In a year where the government is on the lookout for anything that will improve the budget bottom line, which is expected to hit $23 billion when the Mid Year Economic and Fiscal Outlook (MYEFO) is released in December, not everyone is so optimistic that reigning in small tax concessions will have a significant impact on the budget deficit.
Writing for SmartCompany in February, Australian Small Business and Family Enterprise Ombudsman Kate Carnell said the government needed to be careful it didn’t rule out legitimate expenses that workers incur in its quest to find easy wins for the budget bottom line.
“There is also a risk employers will be forced to fill the funding gap left by the removal of deductions,” Carnell said.
“This may be problematic because often employers choose not to fund certain expenses because the goods or services purchased can be carried on to other employers if the employee moves jobs.”
The discussion paper notes that submissions are invited from interested parties until December 16.