About 500,000 taxpayers from teachers to nurses who claim tax deductions for non-compulsory work uniforms could be denied the benefit under a new proposal from Treasury that is aimed at saving the federal budget $30 million annually.
For the 2013-14 tax year, about 492,000 taxpayers claimed deductions of $104 million for expenditure on non-compulsory uniforms, at an average of $211 each.
More Business Videos
- Video duration
- 01:11
Are tax deductions on the way out?
- Video duration
- 01:06
CEO discusses McGrath's future
- Video duration
- 02:58
How does a free trade agreement work?
- Video duration
- 01:40
How to get to work faster
- Video duration
- 01:25
Rowling's magical Potter profit
- Video duration
- 00:16
Pumpkin Patch fails to secure buyer
- Video duration
- 01:36
Australia not home when opportunity knocked
- Video duration
- 01:58
Corporate tax cuts to wages furphy
Are tax deductions on the way out?
Deputy BusinessDay Editor Nassim Khadem explains the proposed changes to taxation that would have Australians no longer claiming deductions.
Some of the occupations that make up 40 per cent of the claims are office workers, teachers, sales and marketing, nurses, health workers and carers.
Businesses that employ staff who wear a non-compulsory uniform may be able to avoid paying Fringe Benefits Tax (FBT) on any subsidies they make towards the "uniform".
Employees can also get tax deductions for expenses they incur to rent, purchase or maintain non-compulsory corporate uniform.
The Australian Taxation Office determines the level of tax deductions.
The federal government is reviewing the rules and regulatory requirements in Division 34 of the Income Tax Assessment Act, which deals with tax deductions for expenses for non-compulsory uniforms.
The Treasury paper gives several options for change from revamping the guidelines to outright denying all tax deductions.
Scrapping the tax deductions would deliver the government an extra $30 million in annual revenue.
 Â
Stopping the deductions would also save the Department of Industry, Innovation and Science administration costs incurred in assessing and registering designs that fall within claimable deductions, which costs about $100,000 annually.
The current rules specify that employees can only claim a tax deduction for non-compulsory uniform expenses, where employers have the uniform designs approved and entered on the Register of Approved Occupational Clothing by the Secretary of the Department of Industry, Innovation and Science.
"The review will consider whether the current arrangements remain fit-for-purpose, necessary and relevant and alternative options," the consultation paper says, calling for submissions by December 16.
The objective of Division 34 was to only allow deductions for non-compulsory uniforms in cases where the clothing is clearly identifiable as a corporate wardrobe.
The issue, the Treasury paper says, is whether Division 34 and the guidelines "are the most appropriate mechanism for achieving this objective".
"The government is concerned that the current approach may impose an unnecessary regulatory burden and cost, especially on businesses," it says.
It is not the first time a government has tried to tackle tax deductions.
The Turnbull government had proposed, via an inquiry into tax deductibility held earlier this year, scrapping all work-related deductions and instead replacing them with lower tax rates.
But the tax white paper process failed to result in lower personal tax rates for all, despite Treasurer Scott Morrison and former treasurer Joe Hockey saying lower rates were needed.
Previous governments have also looked at the non-compulsory uniform element. In the 1992-93 budget it was announced that deductions for non-compulsory uniforms would be denied outright.
The purpose was "to ensure that the tax laws do not confer an unfair advantage on some employees by permitting deductions for clothing which may not be essentially different from that worn to work by other employees for which no deductions are allowed".
But the then government moved amendments as at the time it was investing considerable funds in helping the then textile, clothing and footwear industry from countering shocks from tariffs.
0 comments
New User? Sign up