The Administrative Appeals Tribunal (AAT) has ruled a political staffer was wrong to claim more than $3000 in clothing expenses as tax deductions over two financial years, despite her claims she was required to wear “high class” clothing to work.
The employee, who Fairfax reports worked as a senior adviser to former Prime Minister Kevin Rudd, challenged a decision about her tax bill for the 2013 and 2014 financial years. The employee argued she was correct to claim a deduction for clothes purchased given she was required to regularly meet with foreign dignitaries and executives, and was expected to wear clothing of a certain level that she would not usually wear.
However, AAT senior member Teresa Nicoletti outlined expenditure on “conventional clothing” is not permissible as a work expense.
In her decision, she outlined the only time a worker can claim a clothing expense for work is if it is “distinctive or unique to the nature of the employment; can be worn by members of the public; and is unsuitable for activities other than work”.
Because there was no evidence the staffer’s clothing purchases were “distinctive or unique to her employment” the tribunal decided they could not be claimed.
The staffer also sought to claim hospitality expenses and spending at department store Harrods, which were rejected as deductions because “substantiating evidence was not provided to establish that these were work-related expenses and not private or domestic expenses”.
She also had claimed travel expenses to cover the gap between what her employer covered each night for accommodation and the ATO’s guidelines for reasonable travel rates, which at $395 a night were higher than she was entitled to from her employer, but this claim was also rejected.
More than $3,000 in work-related self-education claims were also made, including deductions for a French language course. Senior member Nicoletti decided it was likely French language was “an important skill” in her work-related duties, but found no evidence of the expenditure was provided, so the expenses could not be deductions.
The worker has told the Fairfax she accepts the decision of the tribunal and will pay what she owes. SmartCompany was unable to contact her prior to publication.
Clothing claims have multiple hurdles
According to the Australian Tax Office, the only time an employee is able to claim a tax deduction for clothing warn to work is when “clothing that is specific to your occupation, is not everyday in nature and allows the public to easily recognise your occupation”.
Principal at Perigee Advisers Lisa Greig says while many are still tempted to claim for clothes they wear to work, individualsmust remember they have to jump several hurdles before a claim is valid.
“If it’s something you can wear outside work, then you can’t [claim it],” she says.
This extends to occupations where formal wear is required, because in most cases formal wear can also be worn in a private capacity outside of work, Greig explains.
“The first gate you have to pass through is the connection [between your clothes and] earning an income,” she says.
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For workers in “novel professions” like performance or those requiring protective clothing, what they wear to work is directly related to their ability to do their jobs and therefore usually claimable, Greig says.
The ATO will also consider whether the goods could feasibly be worn by other members of the public or in a private capacity when a worker is not on the job.
“People think, ‘I need to do it for my job, therefore I can claim it’ — but for most things, if it has an application in something outside of your work, it’s a private expense.”
In July the ATO issued a warning to taxpayers to “pull up their socks” when it comes to uniform and laundry claims, with assistant commissioner Kath Anderson outlining these claims have increased by 20% over the past five years.
There were $1.6 billion in work uniform claims made in 2015, a figure tax commissioner Chris Jordan said earlier this year would mean half of Australian taxpayers need things like protective clothing.
Greig says while it’s tempting for workers to make a claim without fully being able to substantiate it, there is big scrutiny from the tax office on these issues.
“Can you justify it? These claims have to make sense.”