As the end of the financial year approaches, many Australians are preparing their tax returns, looking for legitimate ways to maximise their deductions. However, the Australian Taxation Office (ATO) has issued a cautionary note on a controversial claim that has become a recurring issue. This seemingly innocuous claim has the potential to ensnare taxpayers in a web of scrutiny if not handled correctly.
Each year, as Australians compile their expenses in the hope of reducing their taxable income, the allure of claiming high-priced items like handbags is strong. However, the ATO has made it clear that while it’s true that certain work-related items can be claimed to reduce taxable income, the rules around claiming handbags are stringent and specific.
According to the ATO, the key to a legitimate claim is ensuring that the item is used solely for work purposes. This means that the handbag, backpack, or piece of luggage must be primarily for carrying work-related items such as laptops, tablets, work papers, protective equipment, or diaries. If the bag is also used to tote personal belongings like gym clothes, snacks, makeup, or a personal mobile phone, it may be considered to have a dual purpose, blurring the lines between work and private use.
The ATO has been clear: the bag must be suitable for carrying work equipment. This rules out extravagant or purely decorative items, such as ‘sparkly gold clutches’, which are unlikely to be deemed necessary for work purposes.
To illustrate the point, the ATO shared an example of a taxpayer named Elizabeth, who purchased a $150 handbag exclusively for carrying her tablet and work diary to client meetings. Since the bag was used 100% for work and cost less than $300, Elizabeth could claim the full amount as a deduction in the year of purchase.
However, the ATO warns that just because a bag is expensive, it doesn’t automatically qualify as a deductible work expense. Hripsime Demirdjian, founder of Hive Wise, advises taxpayers to exercise common sense when lodging such claims. Claiming a designer handbag, for instance, may raise eyebrows, especially if it’s not a requirement of your workplace to carry such high-end items for work purposes.
The ATO’s message is clear: be very careful with claims for work-related bags. Taxpayers should ensure that the expense is justifiable, necessary, and used exclusively for work to avoid any complications or disputes with the tax office.
As tax time approaches, it’s these finer details—like what you can reasonably claim—that make all the difference. Staying informed about guidelines such as these can save you from potential complications down the track.
Have you ever encountered a tax rule that made you rethink a claim? Or perhaps you’ve learned a helpful tip about work-related deductions? Share your thoughts in the comments below—your experience might help someone else this tax season.
Also read: ATO urgent alert: Cost increases for overdue tax debts are coming!
