ATO says handbags can be tax deductible

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It might be time to hit the shops for a new handbag for work.

The Tax Office has confirmed 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.

Accountants are trying to shed more light on how an increasing number of women in the workforce can claim tax deductions following reports that suggested the ATO makes it easier for men to claim deductions for briefcases than it does for women to claim for handbags.

In an interview for Financy and News.com.au Assistant Tax Commissioner Graham Whyte confirmed that the door is open for a greater number of 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," he said. 

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 women to keep a record of the work use of their handbags, 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.

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 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.

Brassil said the ATO’s rules were simple; if a handbag is bought 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.”

This article first appeared on Financy and is republished here with permission. 

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Bianca Hartge-Hazelman

Bianca Hartge-Hazelman is the Founder & Chief Executive Officer of Financy, a finance publication for women. She started the online magazine while on maternity leave with her second daughter, and after realising that the traditional dull-lens applied to financial content was not empowering enough women towards financial independence -- nor did it resonate deeply with the lifestyle pursuits of all women. Financy corrects this communication challenge through the delivering of personal finance content that taps into the female psyche, connecting women with their goals, and uses tools of entertainment, engagement, education and style to inspire women to live their best life.

Hartge-Hazelman has worked for some of Australia's largest media companies, and has written for the Australian Financial Review, Sydney Morning Herald, The Age; as well as digital programs - including Channel Nine’s Financial Review Sunday program, Fairfax Digital, ABC Radio, ABC’s Stateline, Sky News, Channel Seven, The Weather Channel, WIN News and the Finance News Network in Sydney.

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