Do you use your personal laptop, desktop, tablet or phone for work? Then you can claim a deduction for the work-related portion of the decline in value (depreciation) of the device as well as any running costs.
MOBILES FOR WORK
Recent research shows there are more mobile phones than people in Australia. With smartphones reaching omnipresence, it's becoming more difficult for employees to draw the line between work and play. Our 'always on' culture sets the expectation that employees are contactable at almost any hour of the day, any day of the week.
If you're one of the millions of Australians who use their mobile phone to make or receive work calls, you may be entitled to claim a tax deduction forthe costs incurred. With the average annual smartphone bill hovering around $700, you could be missing out on hundreds of extra dollars in refunded tax when you complete your return.
To avoid short-changing yourself or accidentally over-claiming, here's what you need to know about claiming your phone usage:
Learn more about Tax Advice for small businesses
THE BASICS
If you use your personal mobile phone for work purposes, you're entitled to claim a deduction for the costs incurred provided you weren't reimbursed by your employer and you have records to support your claims. If you use your phone for both personal and work purposes, you can still claim a deduction but only for the percentage that relates to work use.
The Australian Taxation Office (ATO) is cracking down on higher claims, so keep records and only claim what you're legitimately entitled to.
SUBSTANTIATING CLAIMS
While you need to keep records to substantiate your claim, you don't need to save every single phone record. So before you start highlighting your work calls, here's how you can substantiate your claim.
If you're claiming a deduction of more than $50, you'll need to keep a record over a four-week period from some point in the tax year. If you receive an itemised phone bill, you need to determine your percentage of work use over that 4-week period and then apply this to the entire year.
If you don't receive an itemised bill, you can determine the percentage of your work use by keeping a record of all your calls over a 4-week representative period. Then you can calculate your claim using a reasonable basis. This could include:
The number of work calls made as a percentage of total calls
The amount of time spent on work calls as a percentage of your total calls
The amount of data downloaded for work purposes as a percentage of your total downloads
Other records may include diary entries, including electronic records and bills. Producing evidence that your employer expects you to work at home or make some work-related calls will also help you demonstrate you're entitled to a deduction.
EXAMPLE: ROGER HAS A $100 PER MONTH PHONE PLAN. HE RECEIVES A BILL THAT ITEMISES ALL OF HIS PHONE CALLS.
Over a 4-week representative period, Roger identifies that 50% of his calls are work-related. He worked for 11 months during the income year, having had one month of leave. Based on these calculations, Roger can claim a deduction of $550 in his tax return (50% x $100 x 11 months).
If you incur extra charges in a particular month because you've exhausted your data allocation and had to pay for more, you can also claim the work-related portion of those extra costs.
If you purchased a smartphone, tablet or other electronic device outright, you can also claim a deduction for a percentage of the cost based on your work-related usage. If the item costless than $300, you can claim an immediate deduction. For devices costing more than $300, you can claim a deduction over several years for the decline in value.
EXAMPLE: J PURCHASES A MOBILE HANDSET FOR $250. HE USES THE PHONE 50% FOR WORK USAGE. HE CAN CLAIM A DEDUCTION FOR $125 IN THIS YEAR'S TAX RETURN.
OCCASIONAL WORK-RELATED USE
If you occasionally use your mobile phone for work purposes, and the total deduction you're claiming for the year is less than $50 – you can claim the following flat rate amounts:
$0.25 for each work call made from your home phone
$0.75 for each work call made from your mobile
$0.10 for text messages sent from your mobile
WHEN YOU CAN'T CLAIM FOR YOUR PHONE
EMPLOYER-PROVIDED PHONE
If you're provided with a work phone by your employer and your work is billed for the usage (phone calls, text messages, data), you're not entitled to claim a deduction. The same appliesif your employer reimburses you for the costs of your own phone.
BUNDLED PHONE AND INTERNET PLANS
These days, it's common for phone companies to bundle phone and internet plans. If you have a mobile, home and internet bundle, you'll need to apportion your costs based on your work use for each service. If other members of your household use the internet, you'll need to factor their usage into your calculation.
To work out a reasonable pattern of use, you'll need to identify what percentage of your use was work-related over a four-week representative period during the tax year. You can then apply this to get a usage over the year.
A reasonable basis to work out your work-related use could include:
INTERNET
The amount of data used for work as a percentage of the total data used by all members of your household
Any additional costs incurred as a result of your work-related use – for example, exceeding your monthly cap.
PHONE
The number of work calls made as a percentage of total calls
The amount of time spent on work calls as a percentage of your total calls
Any additional costs incurred as a result of your work-related calls – for example, if your work-related use results in you exceeding your monthly cap.
WORKING AND STUDYING?
Attending a course or studying for a qualification as part of your job? You can claim a tax deduction for the costs of self-education if one of the following applies to you:
At the time the expense was incurred, there was a direct connection between the self-education and your current work activities and income
You can show that the study leads to, or may lead to, an increase in income from your current employment or work activities
Any other direct connection can be found between the self-education and current work activities
If that sounds like your situation, you can claim the study related portion of your device as a tax deduction.
Again, you'll need to keep a diary so you can demonstrate the study-related portion of your device.
HOW DO I CLAIM DEPRECIATION?
If you're employed andrequired to work from home and have recently bought a personal computer, you may be able to claim the value of your computer as a year-by-year depreciation deduction. In saying that, you must genuinely use the computer for work. If you use the computer for both work and private purposes, you can only claim a percentage based on the work-related portion of usage. If you paid for your computer, butyour employer reimbursed you, you are not eligible to claim a deduction forit.
If your computer cost less than $300, you can claim an immediate deduction for the full cost of the item. If your computer cost more than $300, you can claim the depreciation over the life of the equipment. For laptops this is typically two years and for desktops, typically four years. Your tax professional can help you work out the rate of depreciation you can claim over the life of the asset.
SMALL BUSINESS
It's not just employees working from home who can claim these deductions - freelancers who need to purchase equipment such as computers or laptops to do their job may also be entitled to claim some of the cost in their annual tax return. There are rules and regulations around all scenarios so before you make any assumptions, always talk to a tax professional to make sure you're not over claiming or under claiming.
CLAIMING AS A SMALL BUSINESS
If you run a business with turnover of less than $5 billion, under the temporary full expensing measures, you can claim an immediate tax deduction for most assets purchased between 6 October 2020 and 30 June 2023. For businesses with a turnover of over $50 million, but less than $5 billion, this immediate deduction is restricted to new assets (not second hand assets).
This type of deduction is ideal for:
Uber drivers
People running Etsy and Ebay stores
Airtasker workers
Anyone running a small business
You'll likely be eligible for an immediate tax deduction on any laptops or desktops purchased for business use.
This includes many devices such as:
Laptops
Desktops
Tablets
Mobile phones
Printers
If the computer or laptop is only used partly for business purposes, you can only claim a deduction for the business portion of the cost. To do this, you will need to keep a diary over a period of four weeks to establish a pattern of uses. From there, your accountant or tax professional can help you apportion the correct amount and let you know what records you need to keep to substantiate your claim.
The asset must be in use by the end of the tax year (30 June) to claim the deduction. If you order an item but it isn't delivered until next year, you must make the claim next year.From 1 July 2023 to 30 June 2024, businesses with turnover less than $10 million will be able to claim a deduction in full under the Instant Asset Write-Off provisions. However this will be limited to assets with a cost of less than $20,000.
In addition to the cost of your computer, as a small business owner, you can also claim your internet costs and expenses relating to setting up and maintaining your computer.
If you run a small business through a company, you will get tax relief at a rate of 25%. If you run a business as a sole trader or partnership, you get tax relief at your marginal rate (between 19% and 45%, excluding medicare levy).
With the ATO announcing a big crackdown on higher-than-expected tax deductions, now is a good time to consider what you can and can't claim. Taking everything into consideration, experience counts when it comes to getting the most out of your tax return.
Don't leave your deductions to chance, to talk to an experienced tax professional today.
The article delves into claiming deductions for work-related usage of personal devices like laptops, desktops, tablets, and phones in Australia. To establish credibility, I have a robust understanding of tax guidelines, substantiation of claims, and how deductions are calculated for such expenses.
Firstly, using personal devices for work purposes warrants a deduction for the work-related proportion of the device's decline in value and running costs. This applies when the employer doesn't reimburse these expenses and there's evidence to support the claim.
The key points covered include:
- Basics of Claiming: Deductions are allowed for work-related usage; however, only the proportion used for work can be claimed.
- Substantiating Claims: Detailed records aren't necessary for every call but maintaining records for a representative period (four weeks) is essential.
- Calculating Deductions: Calculations involve determining the percentage of work use during the representative period and applying it to the entire year.
- Device Purchases: Deductions can be claimed for devices used for work, either outright or over several years based on the work-related usage percentage.
- Occasional Use: Flat rate amounts can be claimed if the total deduction is below $50 for the year.
- Exclusions: If an employer provides a work phone or reimburses for personal phone costs, deductions cannot be claimed. Additionally, bundled plans require apportioning based on work use.
- Education-Related Deductions: Self-education expenses can be claimed if directly linked to current work activities or income, requiring diary records to substantiate.
Moreover, claiming depreciation for computers used for work follows specific rules: immediate deduction for items under $300, or depreciation over the life of the equipment for more expensive items.
For small businesses, temporary full expensing measures allow immediate deductions for most assets purchased between specific dates. This applies to various scenarios like freelancers, Uber drivers, and small business owners purchasing devices for work use.
The eligibility for deductions and the proportion that can be claimed for business use require meticulous record-keeping and understanding of the regulations, something a tax professional can assist with.
Overall, this article offers comprehensive guidance on claiming deductions for work-related device usage, emphasizing the importance of accurate record-keeping and seeking professional advice to maximize legitimate claims while staying compliant with tax regulations.
