The Handbag vs Briefcase deduction debate
If a man can claim a briefcase as a tax deduction why can’t women claim their handbags? After all, men often have a lot of personal items in their briefcases and working women are just as likely to carry their iPads, documents, and other work related items in their handbag. So, what’s the difference and why the disparity? Well ladies it may just be time to hit the shops for a new handbag for work!! But before you try and claim your $4,000 Gucci handbag as a tax deduction, let us step you through the facts of the deductibility debate.
What can you claim a tax deduction for?
The Assistant Tax Commissioner Graham Whyte states that ‘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 goes on to say that handbags traditionally have the ‘hallmarks’ of private expenditure, and 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 therefore no deduction for its cost would be available.
Is the item connected to the work you do?
The first and most basic rule is that there needs to be a connection between the income you earn, and the item purchased. The Australian Tax Office (ATO) can ask you to prove what you have claimed is connected to your job and if you claimed the full cost, then you need to prove that the item is 100% used for work purposes. So if you are thinking of claiming a deduction for the purchase of your handbag, then it may be prudent to keep a record of the work use, as evidence should the ATO conduct an audit of your personal tax affairs.
Can you prove you paid for it?
The ATO always requires a receipt or paperwork to support any purchase you claim a deduction for. If you don’t have this and you are audited, then the ATO will simply deny your deduction.
Does the price tag make a difference?
Does the price of a work related expense make a difference? For example, if the ATO accepts a deduction for a $200 laptop bag will they also accept a claim for say a $4,000 Burberry laptop bag? It comes down to a question of need. If the claim is excessive, you need to prove that the excessive cost is actually required for your job. The larger the deduction claimed the more likely it is that your tax affairs will be reviewed by the ATO.
You are entitled to claim deductions for expenses which are directly related to earning your income. However when an expense is for both work and private purposes, you may only claim a deduction for the work-relation portion.
If you use your mobile phone for work purposes, you may able to claim a deduction if you paid for these costs and have records to support your claims. If you use your phone for both work and private use, you will need to work out the percentage that reasonably relates to your work use.
The ATO recently denied a claim by a labourer for $1,200 in mobile phone charges. The worker claimed the phone was necessary to keep in touch with co-workers. But, when the ATO contacted the employer, they said the labourer did not need his phone for work. The claim was reduced to $50.
Self-education courses are another expense that is often claimed and one the ATO is looking closely at. There have been numerous cases of people claiming overseas travel, course fees, and accommodation as self-education expenses. Unless you can prove that you needed to complete the course overseas, it was directly connected to your employment, and the fees you are claiming only relate specifically to the course, you can’t claim the full amount. Remember, even if the ATO does not immediately detect a questionable claim, they can review past claims and adjust them, particularly where there has been evidence of evasion or fraud.
The weird and wild tax deductions available
Claiming your home internet expenses – this is an area the ATO has flagged for close review. Teachers in particular have come under scrutiny in previous years for claiming all of their home internet expenses as work related expenses. It’s important to get the proportions right. If you are required to work from home and use the internet to do this, you can only claim that portion of your internet expenses you spent working.
Hand cream – yes for airline crew but not builders.
Gym membership – Members of the Australian Defence Force in Special Forces can claim gym fees and other related costs in some cases as they need to maintain such a high level of fitness.
Landlords can claim costs associated to their rental property such as flying interstate to inspect the property. But, be warned, if you do anything other than inspect the property and return on the next plane, your deduction may be reduced or declined. If you spend time doing something other than inspecting your property, then you can only claim the portion of the costs related to the rental property. Also be aware that deductions claimed for rental properties must be in line with your ownership interest. If there is more than one owner then you can only claim deductions in the same proportion as your ownership interest.
Newspapers and online news access – if you are a professional who can prove they need to be across the news then you can claim these costs.
Access to tax deductions has nothing to do with gender – it’s all about the basic rules of how closely connected the purchase is to your job and your ability to prove your case.