ATO says handbags can be tax deductible

Are you making the most of your tax time deductions? It's time to look into whether or not you could be claiming handbags as we approach June 30.

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It’s coming up to tax time again which means it’s also time to brush up on a few facts for claiming handbags as a tax deduction.

The Australian Tax Office says that handbags used for work are tax deductible in certain situations, but women may just have to keep a logbook to prove it lugged more than lipstick to the office.

Assistant Tax Commissioner Graham Whyte confirmed to Financy that the door is open for a greater number of tax claims to be made on handbags.

“You can claim a deduction for assets that are predominantly used for work purposes, such as bags and satchels used to carry work papers or electronic devices, to the extent that such items are used for work purposes.

In a statement, he said that while handbags have the “hallmarks” of private expenditure … “it is the use of the item rather than its description that is relevant. For example, if a briefcase is primarily used to carry lunch and other personal items to work it is being used in a similar way to a handbag and no deduction for its cost would be available.

Paul Brassil partner private clients at PricewaterhouseCoopers said it may be prudent for a woman to keep a record of the work use of their handbag, ideally by using a logbook for a period of about three months, in the event that the ATO decides to audit a person’s tax affairs.

“I find it hard to see how the two situations are different for a man and woman. The only difference I see is that one bag is called a ‘handbag’ and the other a ‘satchel/briefcase’,” said Whitehead Dingley & Betar chartered accountant and partner Kate Hills, who claims a tax deduction for her work handbag.

Ms Hills believes the ATO may need to look at updating its view on women’s work handbags given that the work-related usage and connection with the work-related activity would otherwise be exactly the same as a briefcase is to men.

Tax Institute president Arthur Athanasiou said whether the ATO changes its view [on handbags] in the future, that will depend on “if a case comes forward that convinces them that they have been wrong in the past and must now change their approach and allow such claims.”

“Unfortunately, the starting presumption is that a handbag has an equal use for private purposes, and is not deductible.

“However, if a sufficient number of people tell the ATO that a handbag is used for work-related purposes, then it’s possible the ATO will review its position,” said Mr Athanasiou.

A spokesperson for department store giant Myer said if more women started to successfully claim their work handbags, it could be good for business.

“Speculatively speaking, we would expect to see an increase on larger totes, however it would all be dependent on how the tax department define a work bag as opposed to a general handbag.

Mr Brassil said the ATO’s rules were simple; if a handbag is bought for mainly or wholly for work, is used to carry work-related items and is an essential part of a person’s ability to earn an income, then a claim can be made.

“Fundamentally if you are carrying work items to and from work, be that a laptop, work papers and minor personal items, then you are in a position to claim a reasonable deduction for the cost of a handbag or manbag.”

Mr Brassil added that it may be prudent for a woman to keep a record of the work use, ideally by using a logbook for a period of about 3 months, in the event that the ATO decides to audit a person’s tax affairs.

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