Authority allows some refused tax deductions

Press, 7 April 1987, Page 5

Authority allows some refused tax deductions

PA Wellington An Army officer whose tax deduction for expenditure on replacement service kit, mess uniform, shoes, safety jacket, and drycleaning was disallowed by the Inland Revenue Department has won his case in part before the Taxation Review Authority. Clothing expenses ' are not generally tax deductible unless the clothing is necessary to employment or the production of assessable income, Judge Barber reaffirmed.

To be deductible under the Fourth Schedule of the Income Tax Act, 1976, the expenditure must be incurred in the “purchase or repair of any protective clothing, uniform or footwear, or any clothing which is necessary due to the abnormal nature of the employment may be deducted.”

The Judge allowed the deduction of $445.70 for the service kit, $429.95 for the mess uniform, and $76.15 for drycleaning under clause 3 of the Fourth Schedule of the Income Tax Act, 1976, as the officer had received no reimbursement from the Army. He disallowed a deduction of $34.19 for shoes and of $17.85 for a safety jacket because it was “clearly the type of expenditure involved in everyday life and was of a private and domestic nature and non-deductible under sl06(l)(j).”

The matters considered in the case affected many taxpayers, said the Judge, who made some general comments for the benefit of other taxpayers. “The authorities say that expenditure on clothing and its maintenance is generally of a private nature and nondeductible. “In any particular case the expenditure must be related to s!O4 to ascertain whether the expenditure was relevant and incidental to the production of assessable income. “There are two tests which have consistently given rise to deductibility. First, the “necessary and peculiar” principle where expenditure must be on clothing necessary and peculiar to an occupation.

“ Second, where the taxpayer by virtue of his occupation has been required to incur ‘abnormal expenditure’ on conventional clothing.”