The Australian Taxation Office (ATO) is sounding the alarm over a popular tax deduction that can land Aussies in hot water. While there are plenty of work-related items that you can claim each year, handbags are a controversial one.
The ATO said it “sees this one every year” as workers try to reduce their taxable income by claiming they had to fork out hundreds or even thousands of dollars on a new bag. But the tax office said you have to fit very specific criteria for this to be approved.
“When you use the bag or case for both private and work purposes, you need to apportion your deduction,” the ATO said.
“You can only claim the work-related use of the bag or case as a deduction.”
If you want to claim a handbag, backpack, travel bag, case, or piece of luggage, you have to make sure that it is used only for work purposes.
That means it’s used to carry things like laptops, tablets, work papers, protective equipment or diaries.
If you only carry items like gym gear, food, makeup or even your personal phone, it can blur the lines and could fall into the category of private use.
The ATO also warned that if it’s a bag, it has to be able to carry work equipment like a laptop.
The tax office said it needs to be “suitable for that purpose”, meaning you can’t have “sparkly gold clutches”.
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The ATO gave an example of an Aussie worker named Elizabeth, who forked out $150 for a work handbag.
The bag only carries her tablet and work diary, which she takes to appointments with clients during work hours, and she has a separate bag for her personal items.
“Elizabeth can claim a deduction for the cost of the handbag she uses to carry the work items,” the ATO said.
“As the handbag costs less than $300 and is used 100 per cent for work purposes, she can claim a deduction for $150 in the year she buys the bag.”
Hive Wise founder Hripsime Demirdjian said you have to use common sense when you’re lodging this type of tax deduction.
“Be very careful if you’re thinking about claiming a designer handbag,” the tax expert said.
“It is not a good idea, especially because most workplaces wouldn’t demand a bag that is that expensive for you to carry around your belongings. Use some wisdom… that’s all it takes.”
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