Accounting for Psychologist Newsletter #8

It’s back to school this month, so I’d like to wish all those who’ve committed to learning new skills and raising their qualifications all the best in their endeavours.  If you’re new to the newsletter, you’ll find my article about tax deductions for study related expenses here:

https://www.sheridans.net.au/blog/accounting-for-psychologists-newsletter-5/

While we’re on the subject of qualifications, I’d like to take this opportunity to congratulate my colleague Sarah for her successful completion of her studies to become a fully-fledged mortgage broker.  Sheridans now has two mortgage brokers, so if you’re thinking of buying property, or refinancing (something very worthwhile doing in these times of rising interest rates), don’t hesitate to get in touch.

This month I’ll look at important dates for tax, tax deductions for uniforms, and a powerful strategy for saving that couples can put to use.

Important dates for tax 

Tax deductions for Uniforms

Do you wear a uniform for work?  You may be able to claim the cost of the clothing or the laundry expenses as a tax deduction.

Is it protective clothing?

This may be the case if you're working in a hospital environment. If the clothing has protective features or functions that you wear to protect you from specific risks of injury or illness at work, for example, lab coats, non-slip shoes or surgical caps, you can tax deduct the cost of it.

 (www.ato.gov.au/uploadedFiles/Content/IAI/Downloads/Toolkits/TaxTimeToolkit_Doctor.pdf) 

By the way, while we’re on the subject, things that protect you from Covid-19 in the workplace like face masks and hand sanitiser can also be deducted.- Keep your receipts!

Do you wear conventional clothing or a uniform?

If you wear to work what the ATO calls conventional clothing, that is, something you could wear in public without feeling a bit weird and people knowing exactly where you work, it’s not a uniform for tax purposes. A business suit is conventional clothing. A plain t-shirt with a removable name badge is conventional clothing. 

Who pays for the uniform?

If your employer purchases the uniform and pays for cleaning and repairing it, or if your employer reimburses you for these expenses then you cannot claim a tax deduction.  

Is the uniform compulsory?

If the uniform is distinctive to the organisation that you work for and your employer has a strict uniform policy which is consistently enforced, you can claim the uniform and its care as a tax deduction.

If your workplace has a non-compulsory work uniform you can only claim it if your employer has registered the design, which must meet strict criteria, onto the Register of Approved Occupational Clothing with AusIndustry.

Example

Here’s an example of Tran, a psychologist who works at Redgum Mental Health. 

Redgum Mental Health requires employees to wear a company shirt – either a long sleeve collared shirt with the Redgum Mental Health logo embroidered on the pocket or a polo shirt with the logo printed across the back - and black pants or a black skirt to work. Redgum Mental Health has a strict policy : If you don’t wear the shirt, you won’t be permitted to work your shift.   

Tran wears the polo shirt with the company logo on it, black pants and black Doc Martens shoes for her work at Redgum Mental Health.  She can choose the colour of the shirt, but it must have the logo on it. It’s definitely a uniform.  She would feel uncomfortable wearing her polo shirt to a café on the weekend with her friends. Tran is required to buy the polo shirt herself, so she can deduct the cost of it. (Keep the receipt!)  She can also claim a deduction each time she washes it.  She can claim 50 cents if she puts it in with a load of regular washing, or $1 if she washes it separately. She can also claim for dry-cleaning (Keep the receipt!).  If Tran’s laundry expenses are over $150, she’ll need to substantiate her claim with written evidence.  

Even though the black pants are not something Tran would normally buy for herself to wear, they’re not emblazoned with the company logo or “sufficiently distinctive” and could be worn out and about without seeming odd, so they are conventional clothes.  She cannot claim for the cost of the pants or for their laundry. 

Tran doesn’t need to wear special shoes for safety at work such as a nurse’s non-slip shoes.  Her Doc Martens are not tax deductable. 

Saving for working couples

Are you and your partner saving for something major? If both of you are earning a comfortable income, a great strategy for saving is to decide to live on  one income and put the other income towards your savings. 

I know a lot of people who have done this successfully to save for their house deposit and it’s also an excellent way to pay off debt.

In addition, some couples like the sense of financial security and stability that they get from knowing that they have savings for a rainy day – job loss, ill health and so on.  Having significant savings could also provide career opportunities for you and your partner by allowing one, or both, of you to start a business or invest in a course to improve skills and job opportunities.

Do start with  a clear plan, a budget and communication with your partner before making this decision. Start weaning yourselves off the second salary by working out which of your expenses are needs and which are wants, so that you can prioritise your spending.  Initially the transition may be a little difficult, but if you are both working towards the same goal, it’s extremely effective

Or if saving 100% of one salary sounds too challenging, perhaps your family could use one income plus 50% or even 25% of the second income to pay for living expenses.

This strategy is not for everyone, but it’s definitely worth considering.

Sorted. 

My book Sorted.  Financially Well Organised is now available.  It's all about how to get your personal finances... well...  Sorted!   If you’re in Adelaide, be sure to come down to Sheridans at 593 ANZAC Highway to pick up your copy for $15.  Book in for a chat and we can catch up on your financial goals and get 2023 off to a great start. 

You can order it online https://www.openbookhowden.com.au/product/sorted-financially-well-organised/

“Sorted” provides practical information and easy to use worksheets and checklists to help you become financially well organised in each of the eight key areas of personal finance:

• Personal Budgeting
• Savings
• Investments
• Taxation
• Debt
• Insurance
• Retirement
• Estate Planning

You can download an extract of Chapter 1: Personal Budgeting here:

https://www.sheridans.net.au/media/website_pages/sorted/Sorted-chapter-1-extract.pdf

As always, I’m happy to discuss all things financial with you.

Have a wonderful month

Live long and prosper!

Fairuz and the Accountants for Psychology team at Sheridans