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Is Your Dirty Laundry Worth The Risk Of A Tax Audit?

Dirty Laundry

If you claim the standard $150 deduction for laundry in your tax return, you’re in good company.

Statistics from the Australian Taxation Office showed that around 6 million taxpayers claimed laundry in 2018. This is almost half of the Australian workforce, resulting in $1.5 billion in tax deductions. Once you understand the tax definition of a uniform it becomes clear that significantly less than half of the workforce are entitled to these deductions. Any wonder uniform and laundry claims will be in the ATO’s focus for audit this year.

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Careful not to put those non work outfits through the laundry

Uniform claims, and the laundering of these uniforms, are limited to compulsory work uniforms, occupation-specific clothing or protective clothing. To claim a non-compulsory uniform your employer must have registered the design with AusIndustry. You cannot claim anything else including black pants or a business suit, even if it is required for work. Hi-vis clothing is considered protective clothing so Tradies can claim their clothing and laundry. Swimsuits or gym wear are not considered occupational specific so unless you are wearing a compulsory gym uniform you cannot claim your tights and crop tops.

dress

Even if you do have a genuine work uniform, there is a calculation used to determine the laundry claim. You can claim $1 per wash if your uniform is washed on its own, or 50 cents per wash if your uniform is washed with other laundry.  If you are claiming the full $150 in laundry, you would be washing your uniform in a separate wash three times per week for 50 weeks of the year.

While the Tax Man is not in your laundry observing your washing patterns, they can use other means to determine if you are over-claiming. With work patterns changing due to COVID-19, not all taxpayers have been wearing their uniform for the full year.  The ATO will also look at leave taken and what shifts you are doing to determine how accurate your calculations may be.

Like all tax claims evidence is required.  Go back though your diary and work out how many times you would have legitimately washed your uniform.  Even though a simple $150 laundry claim may seem trivial, it is better to be prepared and conservative with your evidence available if requested.  The ATO are expecting to see a change in the patterns of claims this year due to COVID-19.  Don’t risk an audit over a $150 tax deduction. 

Written by Joanne McCauley

Jo McCauley is a CPA accountant with a passion for helping small business owners get the best results. She helps them to understanding how the tax system works, incorporate technology into their business, and interpret the information the numbers are telling them. As the Managing Partner of Jigsaw Tax & Advisory (https://www.jigsawtaxandadvisory.com.au/), Jo has many years of experience in tax and accounting. Noticing a trend in the struggles for small business, Jo foundered Tradie WAGS to help educate and empower the partners of Tradies in running their family business. Connect with Jo at her website https://www.tradiewags.com.au/, follow Tradie WAGS on Facebook, or on Instagram @tradiewags.

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