Handbags and Gladrags

[ tax deductions for women in real estate ]
by John Knight Published

Ball gowns, Jimmy Choos and diamond rings are just some of the things we have seen real estate agents try and claim as a tax deduction. Although, it is unlikely you will ever be able to claim a deduction for any of these items, the ATO has recently been published as saying you may be able to claim a tax deduction for handbags!

Was that a little scream of ‘yes’ I heard?

Before you go running off to invest in your next Prada or Louis Vuitton you need to understand the circumstances in which this may be the case.

The way the tax rules work you can essentially claim a deduction for anything if you meet these 3 conditions [provided the type of expense is not specifically excluded]:

  1. You incurred the expense in doing your job
  2. The expense is not private (personal)
  3. You can show you incurred the expense by producing receipts or other written evidence

Further, if the expense is only partly for work purposes, you can only claim a portion of that expense. If the item costs more than $300, you can only claim an amount for the depreciation of the item over the life of it.

Using the handbag scenario, there is a reasonable argument to say that you can claim the cost of a handbag [or depreciation on that handbag] if you specifically went out and bought a new handbag to fit your laptop, tablet, mobile or other items that you need to carry out your job like pens, forms and promotional material.

If you already have a handbag and you just happen to throw a few work related items in it or you occasionally put your tablet in it for a work meeting then I would suggest no deduction is available as its primary use is to carry personal items.

If you pass the first hurdle, but also carry personal items in the handbag, you need to reduce the deduction for any private usage – and this is where it can get a little dubious because you need to be able to back-up your claim.

How do you determine the private usage of a handbag? Do you tip the contents out and weigh separately the work related items and the private items to come up with a % split? The ATO’s position is not clear on this but the reality is whatever basis you use to apportion the private and business use it just needs to be reasonable.

I would suggest a logbook of your handbag is not necessary [it’s bad enough preparing these for your car] but you do need to come up with a reasonable basis for apportionment of work and private usage.

The news is not so good for ball gowns and Jimmy Choos. The ATO consider all clothing private in nature and not deductible unless it is protective in nature, occupation specific [like a nurse’s uniform] or specifically branded for your company. Unfortunately that may rule out the ball gown, Jimmy Choos and the diamond ring even if you need them to maintain a certain professional standard or for attendance at awards.

John Knight
read more by John Knight

John uses his business improvement and strategic planning skills to help his clients improve their position and boost their profits. John helps his broad client base with his unique business improvement services, strategic planning skills and wealth of knowledge on compliance matters.

Further to his business improvement offering, John provides company and business valuations for various purposes including company purchase/ sale, entity reorganisation and matrimonial or dispute resolution.

John is an expert in all things real estate and has built a reputation in the industry for being far more than just an accountant. He also has an in depth knowledge of the Dental sector and works closely with dentists and dental practices to streamline their accounting processes.

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