Planning to claim for clothing and laundry expenses this year? Find out how the ATO crackdown may affect you…
It’s that time of year again when business owners start to complete their tax returns for the previous tax year.
But it’s also the time when the Australian Tax Office (ATO) issues warnings about infringements that they will be paying particular attention to.
This year the microscope is falling on claims for clothing and laundry expenses.
Why the ATO focus on clothing and laundry expenses?
As with previous years, the ATO focus is based on an ever-increasing number of bloated claims.
With six million taxpayers claiming more than $1.8 billion for clothing and laundry expenses during the 2016/17 tax year, it’s no wonder that the ATO is starting to crack down.
There is no suggestion that all six million claims were submitted fraudulently of course; but there is clearly an issue with people understanding what can and can’t be claimed for.
What laundry expenses can be claimed?
Some taxpayers think they are allowed to claim $150 per year for laundry expenses without having to provide proof or receipts.
But ATO’s assistant commissioner, Kath Anderson, explains that the $150 limit is there to reduce the record-keeping burden and is NOT an automatic entitlement for everyone.
She went on to stress that while you don’t need receipts for the full amount, you do need to have spent the money on work-related clothing.
Note that with laundry, taxpayers can only claim up to $150 per year for washing and drying work-specific clothing at a rate of $1 per load, if the load contains only work clothing.
If work-related items are mixed with other types of clothing, the rate falls to 0.50c per load.
What clothing expenses can be claimed?
There is also an issue with employees claiming for conventional clothing such as suits. Ms. Anderson stressed that such items cannot be claimed for, even if your employer stipulates that you wear such items for work.
The only items that can be claimed for are occupation-specific clothing items that can only be worn for work. A good example is high-visibility clothing, which you are unlikely to wear anywhere other than work.
The ATO is watching!
Just in case you were thinking that you can get away with claiming for work-related clothing without having to provide receipts, Ms. Anderson said that the ATO is using new sophisticated machine-learning technology to scrutinise tax returns to identify fraudulent claims.
This includes comparing tax data with others in similar occupations. If the system raises a red flag, an investigation will be carried out.
So you have been warned!
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