Are you looking to buy a new handbag in the EOFY sales? Or perhaps you’ve just bought one. Well, hold onto that receipt because you might just be able to claim your bag as a tax deduction.
Yes, really. How?
Keep reading to find out
Work-related Expense: As the ATO have advised you may be able to claim a deduction for a handbag, briefcase or satchel you buy to carry items you are required to use and carry for your work, such as laptops, tablets, work papers or diaries.
How to Justify Your Claim: Firstly keep your receipt. Following that the amount of the deduction will depend on the how much you use the bag for work purposes. As we know the ATO has been quite clear in advising that they will be reviewing work related deductions closely so it may be prudent to keep a record of that work use, ideally by using a logbook for a period of about 3 months.
What You Can Claim: This is the important part, but also where it can get complicated. It depends on whether you are an employee or self-employed. Generally for an employee with a bag costing less than $300 you can claim an immediate deduction in the year in which you made the purchase. However bags costing over $300 will need to be depreciated over a number of years depending on the estimated life of the bag. Self Employed tax payers who are a small business and registered for GST can first claim the GST component back of the cost of the bag and subsequently the balance of the bag in the year of purchase if they meet the small business turnover rules.
Now before you go out and buy that Gucci or Louis Vuitton handbag you have been dreaming about please note that designer bags that cost thousands of dollars might be challenged by the ATO when you try and claim the item as a tax deduction. It would be safe to say that most work expenses don’t demand an expensive purchase to carry out the work related function such as carrying a work laptop, iPad or work papers. Therefore it would be likely that the ATO would view most expensive handbag purchases as private.
If you would like any further information on this or any other work related deductions please our office.