Explaining Tax

Creating a corporate uniform for you and your employees can be a fun and creative process, but the legal compliance is rarely made obvious. When the laws governing the provision of clothing is better understood, our experience has revealed that many businesses find themselves exposed and at risk.

Uniformit will ensure that you have a fully compliant uniform policy before we sell you a garment – we call this ethical supply and we see it as our obligation to take all reasonable steps to protect the purchasing behaviours of you, your employees and your business entirety

What do you need to know

A deduction is allowable for the cost of a compulsory and distinctive uniform under section 8-1 of the Income Tax Assessment Act (ITAA 1997). The following reference information has been sourced from the Australian Taxation Office Legal Database.

The taxation interpretations in which work related clothing, uniforms, footwear and associated maintenance costs are deductible, are set out in the ITAA 1997, and better explained through the Tax Rulings TR 97/12 and TR 2003/16. 

We encourage you to consult independent advice in regards to the interpretations and validity to your business and personal circumstances

The Uniformit Management system has been designed to facilitate and support the Tax Ruling described above, providing a level of assurance for our customers that they have purchased garments which can be tax deductible. This in an innovative and unique function which is an integral part of the Uniformit Patent Registration # XXXXXX

Specifics

The structure is built around the Tax Ruling framework of:
a)            Expenses must be incurred
The expense must be incurred by the taxpayer to be deductible
b)            Expenses must meet the deductibility tests
Expenditure is deductible under section 8-1 of the ITAA 1997 where there is a sufficient connection between the expense and the income earning activities, such   that its essential character is work related and not private or domestic in nature.
c)            Expenses must satisfy the substantiation rules listed as:
1)            Conventional Clothing
2)            Occupation Specific Clothing
3)            Protective Clothing and Footwear
4)            Compulsory Uniform
5)            Single Items of Clothing
6)            Non-Compulsory Uniform
7)            Deductions for decline in value of articles of clothing
8)            Fringe Benefits Tax
The Substantiation Rules have been argued over time, and many legal precedents have been established to better explain what has been proven as allowable. A summary of the key statements is listed below:

Conventional Clothing
‘Expenditure on conventional clothing is often not an allowable deduction under section 8-1 of the ITAA 1997’

Occupation Specific Clothing
‘A deduction is allowable for the cost of occupation specific clothing under section 8-1 of the ITAA 1997 because the distinctive characteristics of the clothing provide the nexus between the expenditure and the work activity. An example is a chef's traditional uniform consisting of a chef's hat, chef's chequered pants and a chef's white jacket’

Protective Clothing and Footwear
This is currently under review and Substantiation Rules have been repealed

Compulsory Uniform
‘A deduction is allowable for the cost of a compulsory and distinctive uniform under section 8-1 of the ITAA 1997.’
‘The essential character of an employee's expenditure on clothing items including shoes, socks, stockings and accessories which form an integral part of a compulsory and distinctive uniform is expenditure directly related to the income producing activities of the employee. It is the compulsory and distinctive characteristics which provide the nexus between the expenditure on the uniform and the work activity’
‘A compulsory uniform must be prescribed by the employer in an expressed policy which makes it a requirement for a particular class of employees to wear that uniform while at work, and which identifies the relevant employer. The employer's compulsory uniform policy guidelines should stipulate the characteristics of the colour, style and type of the clothing and accessories that qualify them as being a distinctive part of the compulsory uniform. Also, the wearing of the uniform generally should be strictly and consistently enforced’

Single Items of Clothing
‘Where employees are required, as a strict condition of their employment, to wear at work single items of distinctive clothing, a deduction is allowable for the costs of this item of clothing under subsection 51(1’

Non-Compulsory Uniform
‘Expenditure in relation to a non-compulsory uniform as defined in section 51AL is only deductible if it satisfies the requirements of that section’
‘Section 51AL requires that the design of the uniform has been entered on the Register of Approved Occupational Clothing ('the Register')’
‘The characteristics of a non-compulsory uniform under Division 34 of the ITAA 1997 are: 
a) The wearer has to be an employee, or recipient of a withholding payment covered by subsection 34-5(3) of the ITAA 1997; 
b) The uniform has to identify the wearer distinctively as associated with the employer; 
c) It is not compulsory to wear the uniform, or, if compulsory, the wearing of the uniform is not consistently enforced; and 
d) The uniform design has been entered on the Register’

Deductions for decline in value of articles of clothing
‘Where the initial outlay on long-lasting clothing is substantial (e.g., judges' ceremonial robes) such outlays are, on balance, considered to be a capital expense and the decline in value of the clothing can be deducted under Division 40 of the ITAA 1997’

Fringe Benefits Tax
‘The provision of financial or property support by an employer to enable employees to acquire clothing, accessories and footwear gives rise to a fringe benefit under the FBTAA’