Private ruling: Work related expenses
Date of advice: 7 November 2023
Published: 18 December 2023
Ruling period: Year ended 30 June 2023
Date scheme commenced: 1 July 2022

Ruling: Q1: Are you entitled to a deduction for clothing and alterations? | A1: No. | Q2: Are you entitled to claim a deduction for your spouse's clothing, jewellery, and dry cleaning? | A2: No.

Relevant facts and circumstances: You hold an official position. In your position, amongst other demands, your role is to host, advocate and represent the relevant entity, interstate and internationally. Your spouse is officially recognised as being an essential part of your responsibilities and is included as part of this role on a daily basis. Your role is primarily to provide various representational duties. Your spouse accompanies and directly participates in your roles. At all times they are required to be dressed in a formal manner and do not receive any payment for their valued contribution. You are required to wear a wide variety of formal dress, business suits and uniforms. On almost all instances, your spouse accompanies you and actively participates. The expenses incurred by your spouse are paid by you. As this is early in your appointment, the outlay for attire, commensurate with your new position, is particularly large, and you envisage the remaining years will not be as onerous in regard to this expenditure. You wish to claim for various items of clothing. None of the clothing is required to be worn by you and your spouse under legislation. None of the clothing has logos or emblems on them. You believe that your circumstances are the same as Edwards case as you and your spouse change your clothing a number of times a day when attending events.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. Expenditure on clothing is generally considered to be essentially an item of private expenditure unless the clothing is incidental and relevant to the taxpayer's occupation. Expenditure on clothing which is in the nature of a uniform prescribed by the employer or is protective in nature is deductible. However, expenditure on conventional clothing (that is, clothing of a type which is usually worn by men or women regardless of their occupation) is considered to be private in nature and is not deductible. You have argued that there is sufficient nexus between your employment and your extra clothing expenses. This argument was based on the case FC of T v Edwards 94 ATC 4255; 28 ATR 87 (Edwards case). Taxation Ruling TR 94/22 is quite clear that in most cases expenditure on conventional clothing is not deductible and that Edwards case does not establish a principle that clothing acquired for and worn at work will be deductible. Rather Edwards case was an example of a case where there exists a sufficient nexus between the conventional clothing and the income earning activities to allow the deduction. Paragraph 8 of TR 94/22 states that for expenditure by an employee to be deductible it must have the essential character of an outgoing incurred in gaining assessable income, or in other words, of an income producing expense. There must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of the assessable income. Whether such a connection exists is a question of fact to be determined by reference to all the facts of the particular case. In most cases a sufficient connection will not exist between expenditure on conventional clothing and the derivation of assessable income by an employee taxpayer. In Case 48/94 94 ATC 422; AAT Case 9679 (1994) 29 ATR 1077, the taxpayer, a self-employed professional presenter and speaker, submitted that her circumstances were comparable to those of the taxpayer in Edwards case. The taxpayer maintained a separate wardrobe to meet her work requirements and used this wardrobe exclusively in relation to her work. Sometimes, a client would request that she dress in a specific manner when performing a presentation. Her image was of vital importance in both securing and performing her duties and her clothes were an aspect of her image. Senior member Barbour, in disallowing the deduction for the cost of the clothing said (ATC at 427; ATR 1083) that: While the A list clothes [those used exclusively for work] assisted in creating an image compatible with the applicant's perceptions of her clients' and audiences' expectations, her activities productive of income did not turn upon her wearing A list clothes, however important the applicant may have perceived these clothes to be in her presentation activities. There is not the requisite nexus between her income earning activities and the A list clothing. He went on to say (ATC at 427-428; ATR at 1083-1084) that: the expense is not a business expense is also indicated by the conventionality of the clothing. The applicant did not buy specific clothes for specific presentations (as an entertainer might) or have clothes that were specific and suited only for her employment or business (as a nurse might). The applicant chose to wear her A list clothes for business only, but this does not then enable the expense in purchasing those clothes to be treated as a business expense. Nor did she wear several changes of clothes while performing her duties, such that this expense for additional clothing was purely for the purpose of gaining or producing income, and hence properly regarded as a business expense, despite its conventionality (as in Edwards). In Edwards case the taxpayer was previously employed as an executive secretary and as a consequence her existing wardrobe was of the requisite quality. The new employment resulted in a need to increase the quantity and to include hats, gloves and formal evening wear. Additional clothing was necessitated by employment activities taking her outside Brisbane in circumstances where laundry facilities were not readily available. Consequently, a supply of immediately wearable fresh clothing was required. The quantity and quality clothing was in excess of her normal every day requirements. The taxpayer 'lived in' with her employer and her employment was a seven-days-a week occupation and she very seldom had opportunity to wear her formal wardrobe for private purposes. In the course of her new employment it was normal that she change attire several times during the course of a day. The taxpayer described two changes of clothes in one day as being 'very normal' and... three changes of clothes in one day as being 'not abnormal'. The facts in Edwards case can be distinguished from your circumstances. You have said that you are required to change your clothing multiple times throughout the day when attending different events to meet dress code requirements. Your clothing could be used for other employment and social opportunities. In Edwards case her change of clothing was on a daily basis and could not be worn by her for any other reasons. It is acknowledged that you are expected to dress in a manner compatible with your position as you fulfil your various roles attending work activities. Wearing suitable clothing at functions may have been considered necessary by your employer, however it is not incidental and relevant to the derivation of your income. Attending functions and performing your work duties is relevant to the derivation of your income, wearing suitable clothing is merely a prerequisite to attending these functions. You are not able to claim a deduction for your spouse's clothing, jewellery and dry cleaning even though they do not receive any renumeration for their duties. You are not able to claim deductions for other people in your tax return. For a deduction to be allowable it has to have a connection to income earning activities and your spouse does not earn any income. The expenses are private in nature and therefore not deductible under section 8-1 of the ITAA 1997.