Work related expenses have probably been a tax quandary from soon after 1936. From the notion of explaining how much your income was, what your deductions where and then tell us – to much more complicated considerations of whether an item relates to earning assessable income.  Much advice has been provided by the ATO and very esteemed people along the way. The recent TPB eNews article of the 1st of April 2020 link proceeds further down the path of improving guidance.

We think the TPB guidance enhances the useability of the ATO’s material by building and developing on it.  For example, the ATO’s Practice Statement PSLA 2005/7 and on-line assistance QC 33372 take a practitioner to a certain level of understanding.  The ATO material necessarily uses the word “incurred” which even to a practitioner may not be clearly intelligible in its full import.  It further states that clothing must be “eligible” clothing.  A client may consider that any clothing worn to work is eligible so further interpretation of that is required.  This creates a potentially confusing and frustrating dialogue with a client.  The TPB article takes the thinking to a deeper and more practical level by suggesting a framing question that could be asked of a client “How does this relate to earning your income?” 

A major benefit of considering the issue in this light is that it contains a strong element of potential client education.  By posing a question such as this the client is led to consider the reasoning behind the claim for a deduction.  From this point onward it could be expected that they have a greater appreciation of why something is or is not deductible.   Which in turn makes for a better working of the tax system.


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