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Claiming clothing this tax time?

The Australian Tax Office (ATO) is cracking down on claims for work-related clothing and laundry expenses this tax time.

Last year total claims for work-related clothing and laundry expenses totalled nearly $1.8 billion. The ATO has acknowledged that many of these claims are legitimate. However, it is unlikely that half of all taxpayers would have been required to wear uniforms, occupation-specific clothing or protective clothing.

The Tax Office is in the view that many taxpayers are either making mistakes or deliberately over-claiming. Common mistakes that are observed include:
– Claiming for something without having spent the money
– Not being able to explain the basis for how the claim was calculated
– Claiming ineligible clothing (eligible clothing is occupation-specific, protective or uniform)

Another concern facing the ATO is the number of claims which totalled exactly $150. This amount is the threshold that requires taxpayers to keep detailed records. The ATO is reminding taxpayers the $150 limit is not an automatic entitlement for everyone; it is in place to reduce recordkeeping burden.

Normal clothing is another deduction under scrutiny. Claiming for normal clothing such as a suit or black pants is not legitimate, even if you only wear it to work, or your employer requires you to wear a particular colour and so on.

The ATO uses sophisticated technology to analyse claims and compare them to other taxpayers in similar occupations and earning similar income.

If a taxpayer cannot substantiate their claim, they should prepare to be refused and potentially face a penalty for failing to take reasonable care when submitting their return.

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Income stream within an SMSF

March 18, 2019

One of the best ways to ensure regular, flexible and tax-effective income as a pensioner is through an income stream from your SMSF. As a member, you can receive an income stream in a reoccurring series of benefit payments from your super fund.

Income streams from an SMSF are usually account-based, which means that the amount allocated to the pension comes directly from a member’s account. Once an account-based pension commences, there is an ongoing requirement for the trustees of the superannuation fund to ensure the pension standards and laws are met.

Standards that must be met in order for SMSFs to pay income stream pensions include:

SMSF trustees may need to amend fund trust deeds to meet the minimum pension standards. For more information on how to do this, you should consult a legal adviser. Records must be kept of pension value at commencement, taxable elements of the pension at commencement, earnings from assets that support the pension and any pension payments made.