If you buy a handbag to aid you in your employment or for running your business, you might be eligible for a tax deduction. In this article, we will take you through all possible deductions that can apply to your purchase and what are the conditions you have to meet in order to avail of these deductions.
Rules Pertaining to Handbag Tax Deductions
The only hard and fast rule when it comes to tax deductions on your bags is that they must directly relate to the generation of your income. The Australian Taxation Office (“ATO”) has stated that they will be monitoring all work-related tax deductions more closely.
For example, your deduction is likely to be rejected if your bag is a small one used to carry your mobile device and bank card, although one can argue these items are just as important for your business. Additionally, if the bag in question carries a change of clothes for emergency cases, it’s most likely to be rejected as well. Moreover, a bag you did not buy yourself is also ineligible for a tax deduction.
However, for an employee working in a more dynamic capacity that requires them to move from desk to desk or even office locations, buying a handbag or backpack to carry the business essentials will likely get the tax deduction.
What Can You Claim For
As stated earlier, there are a few conditions that must be satisfied for your bag to be considered a tax deduction. These conditions are:
- The bag must have been purchased with the intention of carrying items or resources necessary for work.
- The costs must be incurred by yourself.
- The deduction must be worked out within the year the cost of purchase was incurred, and the depreciation must be calculated in an effective manner.
- You must keep a complete record for purchasing the bag.
Although you can still claim a deduction on a bag that is being used for both work and personal use, you do need to apportion the deduction with respect to the official usage appropriately.
What Bags Can You Claim For
Here is a list of all the types of bags and cases you can claim a deduction for:
- Laptop bags
- Luggage bags (under limited circumstances)
- Handbags (under limited circumstances)
How To Calculate Your Claim
For bags that are worth $300 or less, there is an immediate deduction that is made available to you by the ATO. However, to be eligible for the claim, you need to satisfy the conditions set by 4 tests, which state:
- The purchased asset must be $300 or less in value at the time of purchase.
- The asset should mainly be used to aid in the generation of non-business income.
- The asset isn’t part of a set that is higher than $300 as a whole.
- The asset isn’t one of the many identical items the person owns.
On the other hand, if the asset costs more than $300, you can apply for a deduction based on the depreciation incurred over its effective life.
Whenever you purchase any sort of asset for the purpose of work operations, be sure to keep all receipts and proof of usage, as you never know what kind of deductions you might be eligible for. Additionally, it is always a good idea to keep a record of the method you use in deciding the work-use percentage of an asset.
Remember to keep detailed records and seek advice from a qualified tax professional to ensure you make the most of these tax-saving opportunities.
This article is for general information only. It does not make recommendations nor does it provide advice to address your personal circumstances. To make an informed decision, always contact a registered tax professional.