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ATO reiterates concerns about work-related expenses

Despite wide publicity on the issue, the ATO has reminded taxpayers that it is increasing its attention, scrutiny and education on work-related expenses this tax time. Assistant Commissioner Kath Anderson said that last year, over 6.3 million people made a work-related expense claim for clothing and laundry expenses, totalling almost $1.8 billion. She said the ATO has seen claims for clothing and laundry expenses increase around 20% over the last 5 years. While this increase isn’t a sign that all of these taxpayers are incorrectly claiming these deductions, Ms Anderson said it is giving the ATO “a reason to pay extra attention”. Ms Anderson said common mistakes the ATO has seen 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. While over 1.6 million taxpayers claim a deduction of exactly $150 for clothing, laundry and dry-cleaning, the Assistant Commissioner said the ATO expects many of these claims to be legitimate, although she warned that the results of random ATO audits show that people are making mistakes. Examples Ms Anderson cited 2 examples where incorrect claims were discovered.

  • A public servant made a number of claims including $150 for work-related clothing, laundry and dry-cleaning. When reviewing her claim, the ATO asked for details of the expenses, including a letter from her employer confirming she needed to wear occupation-specific clothing or a uniform, details of how the laundry cost was calculated, and records to support her other expenses. The public servant’s tax agent advised that the claim was a “standard claim of $150” and could not provide any supporting evidence. The claim was disallowed in full because there was no indication the public servant was required to wear a uniform or had spent the money she was claiming as a deduction.
  • A sales consultant made claims for work-related car, clothing and other expenses. She claimed more than $3,000 for work-related clothing, but, after the ATO contacted her, said she realised her suits did not have a logo. The claim was disallowed because her clothing was not a distinctive uniform or specific to her occupation. She was also unable to confirm she was required to use her car for work and requested that the ATO did not contact her employer, and could not provide evidence for her claim, so the ATO disallowed over $6,000 in work-related car expenses. The consultant also claimed “other work-related expenses” related to food consumed in the workplace by customers and colleagues, and gifts given to customers and colleagues, including underwear, toiletries and a shoe rack. The ATO disallowed these claims as well, because she could not prove she needed to incur these expenses to earn her income. In the end, the consultant had to pay back over $8,000 in tax and received a penalty for being reckless in preparing her return.

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