Worked-related clothing: What is tax-deductible?
My employer requires me to wear specific clothing to my job.
I didn’t already own these clothes
They cost me a lot of money
And you’re telling me they’re not tax deductible?
As you may have heard, the ATO started coming down hard on uniform and laundering claims as of 2018, after approximately 25% of 2018 tax returns were claiming the $150 uniform deduction, the highest amount possible without requiring proof of receipts.
This is also why it’s important to read and understand your tax return before lodging, especially if someone else is preparing it for you. You must also only claim what you are entitled to and what you can substantiate.
The ATO compares the claims of people within the same groups of occupations which helps identify outliers for auditing purposes. The ATO can then request evidence of your calculation and substantiation of your claim and can directly ask your employer about your uniform.
Some of the most common questions we get are regarding work-related clothing and it is hard to get your head around having to pay money for office clothing, certain coloured shirts or certain shoes when there’s no tax deduction. Similarly, beauty products are not deductible for the same reasons despite most workplaces requiring you show up with at least groomed facial hair and neat hair.
One of the best ways to think of it, is differentiating between ‘uniform’ and ‘dress-code’.
The ATO has four categories for claiming uniform and laundering expenses which can also be applied to personal beauty.
Compulsory, Protective, Occupation-specific and and Non-compulsory.
The Compulsory Uniform:
The term “compulsory” in this sense is almost a little misleading! Because almost every workplace in Australia requires their employees to wear certain items, colours or appear a certain way.
In this instance, to claim a uniform purchase or laundry as a tax deduction, the items need to distinctively identify you as a member of a specific organisation.
In a nutshell, someone need only look at you to know where you work, THAT’s a compulsory uniform.
For the most part, these are logo-bearing uniforms.
An example being, fast food restaurants, the combination of the logo on the shirt, colouring of the items and often a logo-bearing hat allows that person to be identified as an employee of a specific organisation.
Similarly, grocery stores which have logo-bearing uniforms, hats and specific colours like Coles or Woolworths, we can all tell from a reasonable distance who they work for.
If your uniform fits into the above, you can claim uniform purchases if you keep the receipt and are not reimbursed, and you can claim laundering of this uniform.
The Protective Clothing:
The term protective clothing may cover a much wider range of items than you expected. You’re probably thinking only PPE or tradie’s Hi-Vis gear, steel cap boots etc. but it also covers items like aprons and sun protection purchases to the delight of hospitality, beauty and outdoor workers!
Basically, if it provides significant protection from the risk of illness or injury arising from your role and work environment, it’s most likely you can deduct it!
The distinctive factor here is how significant the protection is.
I.e. the ATO uses the example that despite regular shoes being worn to protect your feet from the ground and environment, they are not deductible, but shoes with steel caps and/or non-slip soles provide SIGNIFICANT protection from the environment.
Similarly regular jeans and regular long-sleeve shirts do not provide SIGNIFICANT protection from risk of illness or injury. They might protect you from the sun somewhat, but sharp objects, chemicals or fire could penetrate them easily. Thus, only heavy-duty items are deductible including fire-resistant items and clothing which such high density weaves that the protect you from UV.
Other items of note are safety glasses, safety helmets/hats, gloves, Hi-Vis items, overalls, aprons and smocks which avoid you from ruining your ordinary clothing during your regular work activities, sometimes even sunglasses and sunscreen!
If you require these items to carry out your work activities, you can likely claim a tax deduction and laundering!
The Occupational-specific Clothing:
This category has similarities to Compulsory clothing however, must be identifiable as a specific occupation, as opposed to a specific organisation.
Most commonly Chef pants/jackets, Police, Ambulance or Firefighting uniforms, Doctor or Lab coats and Flight crews to name a few. These uniforms are directly identifiable to their occupations even from a reasonable distance!
You can claim these items as a tax deduction and claim laundering of these items!
The Non-compulsory Uniform:
Don’t get your hopes up, once again, the name is somewhat misleading!
In some cases where your employer has designed and requires you to wear a specific outfit to your work which doesn’t necessarily fit into the above categories, they can register the design with Aus Industry.
Once registered, employees required to wear this uniform are allowed to claim purchases and laundering deductions relating to this uniform.
I told you not to get your hopes up!
In An Alternate Universe:
If you work in an office the likelihood is that you have a dress code and have had to purchase pricey items to wear in order to be allowed in the building.
Unfortunately, the ATO describes this as a “dress code” and not a uniform. Whilst irritating to some, here’s some food for thought.
Suit jackets and pants CAN be worn outside of the workplace in certain circumstances without it being considered unusual (unlike wearing your Woollies shirt out for brunch when you’re not working that day!) – the ATO doesn’t have the resources to follow up on every citizen’s pairs of black pants (and when and where they were worn for 12 months!)
If the ATO allowed for suit jackets and pants purchases and laundering to be deductible, other industries could argue to allow their T-shirts to be deductible, jeans and all other “dress codes”.
This would severely blur where the line would be drawn. People are not always honest and conservative and would start throwing in items not worn to work, because they can get away with it (sad to say, but it is true!).
The amount of people lodging claims for large amounts of clothing which are not necessarily for work, would cause a huge backlog in the processing of tax returns and huge increases in audits.
For clothing that is used both in and out of the workplace, a work-related percentage really should be applied, like has to be done for your mobile phone and internet bill. Imagine you or your accountant (and the bill you’d get!) sifting through clothing and dry cleaning receipts, applying these percentages to each item of clothing depending on how much you wore it to work?
Finally, and potentially most importantly, the government would lose millions of dollars in tax revenue (maybe billions) from these deductions, and this income would have to be recouped from somewhere else.
To recoup this they’d likely have to increase tax rates or disallow other tax deductions to make up for it.
So yeah, it sucks if you have to buy and wear specific items to work without getting a deduction for it.
But hopefully this sheds a little light on the alternative.
If you have any queries regarding your work-related clothing, get in contact with us today!
Rebecca Lowe is a graduate accountant who works primarily with our individual tax clients. Throughout her time at university, Rebecca claimed both the CA Australia & New Zealand prize in 2019, and the CPA Australia prize in 2018 due to her outstanding academic achievements.