How to claim a handbags as a tax deduction
Accountant Melissa Browne and the author of Fabulous but Broke gives us all the information we need...
What sort of handbag can you claim?
If I think I can claim my soft-sided, smaller handbag that tucks under my arm and doesn't fit a whole lot in I'm probably going to be disappointed. That's because we're arguing the handbag is being used for work-related purposes. That means it essentially has to fulfil the same purpose and function as a briefcase or satchel. If instead, like me, when you purchased your handbag you took your laptop to make sure it had compartments that would hold it, you're closer to being able to argue a tax deduction.
What sort of use?
The trend to carry two handbags caught on a couple of years ago – the smaller bag to carry your wallet, lip gloss and keys and the second to carry your bulkier bits and bobs. This is where you have a much clearer claim with the Tax Office. If you have a small everyday bag for work and a larger bag used solely to carry your laptop, files and so on then the Tax Office is going to be much more comfortable with your argument that the second bag is being used purely as a work bag. In my case this second bag is a sturdier, more upright handbag that will easily carry my 17-inch laptop, mini iPad, pens, business cards and client files.
Of course, if you don't love the idea of two handbags then you have other options. One is to have a weekday work handbag purchased for its ability to carry your laptop that you use for work only and separate weekend and weeknight bags that are used apart from work.
How to justify your claim
Sure, you could simply argue that your work bag is necessary but it's always preferable to be able to do more than debate your point verbally. The Tax Office loves documentation and in order to support your claim it would be preferable to keep a log book for at least a month to prove usage. If you genuinely have two handbags you may be able to document this with photo evidence proving the usage but if you don't and you're arguing that the one bag fits all then you may need a log book to prove it.
What you get back
This is the important bit right? It's also where it becomes a little complicated. If you're an employee and you find a handbag costing less than $300 you can claim an immediate deduction for the work-related bag to the percentage you're using it for work. For many taxpayers this means a tax saving of approximately $100 in the tax year you purchased the handbag if you can argue it's 100 per cent business use. If your handbag costs more than $300 you'll need to depreciate the bag over a number of years which means your claim is stretched out and so is the tax saving.
For the self-employed it's much easier and if you're registered for GST you'll receive a dual saving. First you'll receive a credit for the GST component and if you're a small business with a turnover of less than $2 million and the handbag cost less than $20,000 you can claim the entire amount as a deduction in the tax year in which you bought it. So for a handbag costing $1100 you could receive up to $100 back in GST and if you're in the middle tax bracket you'll save approximately $300 in tax.
I'm not a fan of spending to receive a tax deduction but if you're going to buy something anyway you may as well be smart about whether it can become one. Other lesser-known deductions include sunglasses, make-up and moisturiser. Most people would argue these are private items but if you're a sales rep, own your own business and are in the car a lot, a junior and spend half your day running around outside, or a teacher and spend a good part of your day at assemblies or on play ground duty then all of these may become deductible. How? Through the sun protection claim, which means of course that your moisturiser and foundation must have an SPF factor in them.
Now before you ask if you can claim suits, shoes and workwear the answer is probably no. The line has to be drawn somewhere. However, by understanding more of what the Tax Office is looking for in a claim, you can make decisions when you're buying items to ensure you're maximising your refunds at tax time. Now if only I could find a steel-capped pump with a five inch heel …
Find a selection of beautiful leather tax deductible totes right here! Happy shopping ladies and don't forget to keep those receipts.