Have you ever bought a handbag or backpack for work and wondered if you can claim it at tax time?
It turns out that these items may be tax deductible, providing they comply with some rather strict rules.
Here's what to know about claiming handbags, backpacks and other work bags as a tax deduction.
The rules for claiming a tax deduction for a handbag or backpack
There are several important rules that you need to be aware of before claiming a tax deduction for a bag, case or satchel:
- You must have paid for the item yourself;
- You must need to carry items for work;
- You must keep records for the purchase of the item and its use; and
- You can only claim "work-related use" of the bag or case as a deduction.
Why you can't claim a tax deduction if you carry lunch in your bag
If you're considering claiming a tax deduction for a bag, it's important to understand how the Australian Taxation Office (ATO) differentiates between private and work use.
If you're using your bag to transport lunch, personal beauty products, gym gear or a private computer, it would be considered personal use and therefore not eligible for a tax deduction.
If you're using a bag or case to carry items exclusively for your job — for example, a work computer or tablet, work documents or protective equipment — that would be considered work-related use.
"There must be a need for you to transport the items for work and the bag itself must be suitable for that purpose," ATO Assistant Commissioner Rob Thomson says.
"You can't claim a deduction for a bag you use for carrying personal items to work each day."
The tax office will also consider the type of bag you're claiming, Mr Thomson says.
"What is generally known as a handbag is more likely to have a private purpose and won't be deductible, whereas a laptop bag used to carry your work laptop is more likely to be deductible," Mr Thomson says.
However, you may still be able to claim a handbag, providing it is within the guidelines — such as in this example from the ATO's website:
Elizabeth buys a handbag for $150 to carry her tablet and work diary between appointments with clients. She only uses the handbag to carry the work items and she carries another bag for her personal items. She does not use the handbag that carries her tablet outside of work hours.
Elizabeth can claim a deduction for the cost of the handbag she uses to carry the work items. 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.
How do you claim a deduction for a bag or handbag?
Bags and cases are generally treated as depreciating assets. The deduction you can claim will depend on the cost of the item.
You can claim these items in the "other work-related expenses" section of your tax return.
Deductions for bags and cases under $300
If the bag or case costs under $300, you can claim the deduction immediately on your tax return.
To make a claim, you'll need to satisfy four tests:
- 1.The cost of the asset (in this case the bag or case) must be $300 or less;
- 2.The asset must be mainly used for work purposes (meaning more than 50 per cent of the time);
- 3.To claim an immediate deduction, the asset must not be part of a set of assets costing more than $300;
- 4.The asset can't be one of a number of items that are identical or substantially identical.
If you only use the bag or case for work, you can claim the entire amount.
If you use the bag for private purposes and work, you can only claim work-related use. For example, you would claim 60 per cent of the cost if you use the bag 60 per cent of the time for work purposes.
"Forgetting to apportion a deduction for private use is a common mistake," Mr Thomson says.
If you use the bag less than 50 per cent of the time for work, you can't claim a deduction at all as it's not "predominantly" for work purposes.
Deductions for bags and cases over $300
If the bag or case costs over $300, you can't claim the entire amount immediately. Instead, you can claim a deduction for the decline in value over the item's effective life.
Again, you can only claim work-related use; you'll need to adjust the deduction if the bag is also used for private purposes.
If you use a tax agent to help you with your tax return, they can help you work out the deduction.
Otherwise, you can use the ATO's depreciation and capital allowances tool to calculate the amount you can claim.
What records do you need to claim a tax deduction for a bag?
Mr Thomson says you need to keep electronic or paper records to support any claims you make in your tax return.
That means something like a receipt or an invoice — a bank transaction record is not enough.
"If you use your bag for work and private purposes, you will also need records to show how you worked out your work-related use of the bag," Mr Thomson says, such as a diary or similar record.
More information about claiming tax deductions for bags and cases can be found on the ATO's website.
This is general information only. Consider obtaining advice from a tax professional in relation to your particular circumstances.