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. In other words, you need the item to do your job. 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. You can see the immediate problem here with claiming 100% of that Gucci handbag – it's fairly unlikely it is only going to be used for work purposes and it would be up to you to prove otherwise. Whereas with a briefcase, unless you were going to a Revenge of the Nerds fancy dress party, it's unlikely you would carry it around for any other reason than for work.
The same issue applies to other deductions. 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.
Did your employer already pay for it – directly or indirectly?
If you already claimed the cost of the item you purchased from your employer, you can't generally claim it as a personal deduction. The same applies if your employer provides you with an expense account or payment as part of your remuneration package to cover specific costs.
The ATO recently cracked down on travel expense claims. A boilermaker's $8,000 travel claim ended badly when the ATO discovered that he received a travel allowance for the same amount from his employer. He ended up with a $4,000 tax bill as the $8,000 allowance he received had not been declared in his income and the ATO then applied penalties and interest.
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.