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Good news you might be able to claim your handbag on tax

THERE’S never been a better time to hit the shops. Despite reports to the contrary, it seems women may be able to claim handbags on tax.

But theres a catch you have to keep a logbook to prove it carried more than lipstick and lunch to the office.

Accountants are trying to clarify tax rules for women, following reports that suggested that the Australian Tax Office (ATO) makes it easier for men to claim deductions for briefcases than it does handbags.

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.

Assistant Tax Commissioner Graham Whyte has opened the door for a greater number of claims to be made on handbags by clarifying to that a person 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.

Mr Whyte said that 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 a woman to keep a record of the work use of a handbag, ideally by using a logbook for a period of about three months, in the event that the ATO decides to audit a persons tax affairs.

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, he said.

Department store giant Myer is happy about this news, for obvious reasons.

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, said a spokesperson.

The cost and size of a handbag, as well as a persons profession, are likely to be issues that the ATO looks at when reviewing a claim.

Handbags that are large, such as tote bags, and those with lots of compartments are seen to be more suitable for carrying work items compared to a smaller clutch-type handbag.

If you have an ultra-expensive item then you are very likely to get a challenge from the Australian Tax Office (ATO) if you make a claim, said Mr Brassil.

Most work expenses dont demand an expensive purchase to carry out the work-related function such as carrying items, so the ATO may view most of the cost is of a private nature, he said.

And handbags arent the only surprising item women can claim. Sunscreen, gloves, sunglasses and hats can also be tax deductible if you can prove those items are clearly linked to your job or if they protect you from the risk of illness or injury while performing your job.

For example, someone working as a courier or in a sales role who spends most of their time in the car visiting clients, could claim the purchase of driving gloves, sunglasses and sunscreen to protect them from the sun while in the car.

But there is some bad news. Despite the perception that makeup is needed to make a person presentable for work, its not commonly allowed as a tax deduction unless youre performing on stage or screen.

Bianca Hartge-Hazelman is the founding editor of womens online money magazine

Rba keeps rates on hold at 15 per cent

IT WAS a safe Melbourne Cup day bet. As widely expected, the Reserve Bank has left the official cash rate on hold at 1.5 per cent at its November board meeting.

The RBA last cut in August, the second this year following a cut in May. Despite Melbourne Cup day traditionally being a popular day for the RBA to move rates, the majority of economists predicted no change this month.

The RBA has avoided moving for the past four Melbourne Cups, but moved rates up or down every year from 2006 to 2011.

RBA Governor Philip Lowe said the rate of increase in house prices was lower than a year ago, but had picked up over the past few months in some markets.

Considerable supply of apartments is scheduled to come on stream over the next couple of years, particularly in the eastern capital cities, he said in his statement.

Tim Lawless, research director at CoreLogic, said the decision to keep rates on hold was arguably one of the safer bets today.

The performance of the housing market was likely a key topic of discussion among RBA board members, with CoreLogics October results released today showing a further 0.5 per cent rise in dwelling values across the capital cities, he said.

Mr Lawless said the index had increased by 4 per cent across the combined capitals since the first rate cut in May this year, with bigger rises in Sydney and Melbourne. With the cash rate on hold, mortgage rates are likely to remain at the lowest level since the mid 1960s, he said.

Its becoming more broadly accepted that such low mortgage rates have contributed to a renewed strengthening in housing market conditions despite lower transactional activity and rising affordability constraints, and policy makers would be reluctant to offer more stimulus to the already hot housing market performance.

LJ Hooker chief executive Grant Harrod said the decision to leave rates on hold was a positive for the property market, with auction clearance rates surging over 80 per cent for Sydney and Melbourne last month.

As Octobers auction clearance rates showed, sellers are enjoying a period of strong demand in the marketplace, Mr Harrod said.

A cut would have heightened already strong levels of competition and potentially furthered affordability concerns, and that could have had a negative impact heading into the end of the year. While most Australians will be enjoying a punt today, the RBA decided to make the safer bet and hold tight.

Latest figures from the Australian Bureau of Statistics showed inflation running at 1.3 per cent in the September quarter, below the target range of 2 to 3 per cent.

AMP Capital chief economist Dr Shane Oliver said while September quarter inflation figures were low, they were in line with the RBAs own expectations.

Economic growth in Australia looks reasonable with the worst of the mining investment slump behind us and a rise in commodity prices is starting to boost national income again, Dr Oliver wrote in a client note.

The RBA can afford to be patient in waiting for inflation to head back to target, thereby avoiding the risk of adding further instability in the form of house price acceleration in Sydney and Melbourne with another rate cut, he said.

Graham Cooke, insights manager at comparison website, said another cut wasnt likely until next year.

A few months ago a November rate cut looked likely, but promising inflation data, solid house price growth in the capital cities, and robust employment figures have diminished the likelihood of another rate drop this year, he said.