A taxpayer employed by the Department of Corrections as a dog handler had partial success before the AAT in claiming deductions for expenses incurred in the course of his employment, including the costs of certain garments sufficiently distinctive as clothing of work and several gym memberships, the latter in accordance with a broad reading of the tax ruling TR 95/13.
The taxpayer was employed as a dog handler in the South Australian Department of Corrections Special Operations Unit. In this capacity, he was responsible for the training and maintenance of 2 dogs. He closely supervised their deployment within the prison system and was responsible for their welfare outside working hours, which included the feeding, exercise and grooming of the dogs as well as the cleanliness of their enclosure built in this effect in his garden.
As a member of the emergency response group, the taxpayer had to be available to help in the event of an emergency (for example, a prison disorder, prison break, or drug search). He had to maintain a high degree of anaerobic capacity (to control a large German Shepherd on a leash in an unstable situation) and a high degree of aerobic capacity (enough to enable him to move effectively with his dog, to control it and to manage it. lead in an emergency). He also had to be prepared to overpower the prisoners himself.
The taxpayer claimed various expenses allegedly incurred in respect of his employment on his tax return for the year ending June 30, 2018. Following an audit, many of the claims were denied and the taxpayer received a modified assessment. The taxpayer objected to the amended assessment and then requested a review of the Commissioner’s objection decision, which was largely unfavourable.
At issue before the AAT were claims for work-related automobile expenses (for travel between the taxpayer’s residence and work, as well as between his residence and the various gymnasiums he attended), work-related clothing expenses (miscellaneous items) and other work-related expenses (including multiple gym memberships, fitness equipment, dietary supplements and gym clothes, a dress-up video $303 dog fee, USB Wi-Fi device (dongle), furniture and dietary treats for dogs, and home office expenses and equipment). Regarding gym memberships, the taxpayer said he maintains multiple memberships to “mix” and maintain interest, and to gain access to different equipment.
The taxpayer’s evidence was that he kept receipts, but lost several during 2 moves. He therefore reconstructed the deductions from his bank statements. The Commissioner’s position was that keeping a receipt (and not simply a bank or credit card statement) was a legal precondition to lawfully claiming a deduction absent the discretionary power provided for in s. . 900-195 of the In-Year Income Tax Assessment Act 1997. The Commissioner also argued that (except for anti-puncture gloves, which he acknowledged at the hearing were a special piece of equipment), work-related clothing expenses were clothing normal items for which no deduction could be claimed or were not items of clothing recommended by the employer as a necessary or reasonably appropriate purchase for employees.
The taxpayer’s evidence that the receipts had been kept but had been accidentally lost was accepted by the AAT, which concluded that the expenses claimed were incurred pursuant to the exercise of the discretionary power of s. 900-195. The AAT then considered whether the various expenses were properly deductible.
The AAT found that the claimed work-related car expenses of $3,300 were not deductible. The taxpayer had been provided with a vehicle by the Department of Corrections and used this vehicle to travel between his place of work and his residence. To the extent that he used his own car between his home and the gyms, this claim was also not deductible. This trip was not undertaken for the purpose of earning income or in fulfillment of any of the taxpayer’s prescribed obligations.
With respect to work-related clothing expenses, the Commissioner’s argument that the clothing items were not prescribed or recommended by the employer had to be rejected. The key issue was whether the employee purchased the clothing or equipment in good faith for use in the course of his employment. However, the argument that there was a distinction between ordinary clothing (which was not deductible) and so-called unusual clothing (which was deductible) had to be accepted. A useful practical test to apply was to ask if the item of clothing would be worn on occasions other than work. Applying this practical test, the taxpayer’s claims for expenses incurred for a uniform belt, waterproof jacket, and waterproof boots were to be allowed, while claims for a light jacket, fleece sweater, and sunglasses were not.
As for other work-related expenses, a stopwatch, dog bed, dog mister, dog treats, dog training video and dongle, and work vehicle car wash had to be allowed , while a home office expense, fixed expenses, telephone, computer and internet costs, and a depreciation claim for a new cell phone were not.
The AAT held that the deductions claimed for multiple gym memberships should also be allowed, as they were all taken by the taxpayer in an effort to maintain a high level of fitness for his job. There was a plausible and demonstrable connection between the taxpayer’s gym regimens and his desire to maintain himself in peak physical condition as a member of the emergency response group. The AAT said there was no reason for the tax ruling TR 95/13 (which related to police fitness expenditures) should not apply to correctional officers. However, the taxpayer’s claims for gym clothing, equipment and dietary supplements were private in nature and should not be allowed.
The impugned decision was therefore set aside, with the matter remitted to the Commissioner for reconsideration in accordance with the reasons set out above.