Can a Handbag be a Tax Deduction?

Can a Handbag be a Tax Deduction?

Well yes, sort of – if there is a reasonable expectation that you need to carry around a laptop or work files you may be able to claim a tax deduction.

Let’s break it down:

The bag needs to be large enough to carry a laptop or work files. It needs to be equitable in function to say a briefcase or satchel.

If the bag is purpose designed to hold and carry a laptop then it’s more probable you can claim it.

If you have a smaller everyday bag which you carry your phone, wallet, and keys. And a larger bag for work items, then you’ll be able to justify your claim more easily.

If you only use your new bag during the week when you’re working, then that too makes the distinction much easier. If, however, you also using the same bag on the weekends the ability to make a claim becomes murky.

When coming to claim time, it’s not as simple as saying “I use it for work” . In some instances, the ATO might request a logbook of usage (yes – seems excessive), but the ATO love a paper trail. You then need to weigh up the cost / benefit of creating a log book versus what you will potentially get back.

You need to be able to justify to the ATO what percentage you used the bag for work purposes.

A handbag can only be claimed as a tax deduction for legitimate work use.

How much do I actually get back?

This depends.

If you work for someone else and the bag costs under $300 then you can make an immediate deduction. Based on the “average taxpayer” for a bag that costs $299, the amount you might get back is about $100.

If the bag is worth more than $300 and you’re an employee, then you’ll need to depreciate the cost of the bag over a few years.

If your self-employed – the rules are more straightforward. So long as the bag costs less then $20,000 you can claim the full deduction immediately.  And if you’re registered for GST, you’ll be able to claim back that component too.

What Next?

It’s important to understand that buying any handbag won’t justify a deduction; it needs to be specifically for work purposes. Having said that – if you’re in the market for a new work bag there is nothing wrong with taking advantage of the deductions available to you.

Of course, if you do purchase a bag for work related activities make sure you keep a receipt. If there is any doubt about the use of the bag, keep a three month log of when you actually used it and for what purpose.