Claims for electronic devices, phones

That technology has changed many aspects of our daily lives is a widely accepted fact of life, and no doubt more is just around the corner. Claims for electronic devices, phones

The proliferation of electronic devices of all kinds has also pervaded our work and home environments to such an extent that the line dividing what is a working tool (and therefore a possible tax deduction) and a “life” tool has become increasingly blurred.

A rising trend of recent years has been the growing number of claims made by taxpayers for work-related tax deductions. The ATO reports that work-related expenses are the most common claimed as a tax deduction.

Adding to the impetus to make claims is the growing number of employees (of many professions) increasingly doing some work from their home – not as a home-based business (more on that here) but to finish off or add to employment duties while not at their place of employment, either at a more convenient (or quieter) time or to fit in with family obligations.

The attendant electronic tools – laptops, mobile phones, tablets – can generate a lot of useful tax deductions for a client’s annual tax return claims. However it must be emphasised that using devices for both work and private use will require clients (or yourself on their behalf) to work out a percentage that reasonably relates to work use.

4-week representative period
The ATO says taxpayers need to keep records for a 4-week representative period in each income year to claim a deduction of more than $50. These records may include diary entries, including electronic records, and bills. Evidence that their employer expects them to work at home or make some work-related calls will also help demonstrate an entitlement to a deduction.

If an employer provides an employee with a phone for work use and is billed for the usage (phone calls, text messages, data) then the taxpayer is not able to claim a deduction. Similarly, if they pay for usage and are subsequently reimbursed, they are not able to claim a deduction.

As there are many different types of plans available your client will need to determine work use using a reasonable basis. If the work use is incidental and they are not claiming a deduction of more than $50 in total, they may make a claim based on the following, without having to analyse the bills:

  • $0.25 for work calls made from a landline,
  • $0.75 for work calls made from a mobile, and
  • $0.10 for text messages sent from their mobile.

If they have a phone plan with an itemised bill, they need to determine the percentage of work use over a 4-week representative period, which can then be applied to the full year. 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 total calls
  • the amount of data downloaded for work purposes as a percentage of total downloads.

Bundled phone and internet plans
These days, phone and internet services are often bundled. When a client wants to claim deductions for work-related use of one or more services, costs need to be apportioned based on work use for each service. If other members in their household also use the services, this needs to be taken into account in the calculations.

With a bundled plan, your client needs to identify work use for each service over a 4-week representative period during the income year. This will allow a determination of the pattern of work use, which can then be applied to the full year.

A reasonable basis to work out work related use could include:

Internet:

  • the amount of data downloaded for work as a percentage of the total data downloaded by all members of the household
  • any additional costs incurred as a result of work-related use – for example, if work-related use results in exceeding a 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 total calls
  • any additional costs incurred as a result of work-related calls – for example, if work-related use results in exceeding a monthly cap.

The ATO is quite used to accepting claims made for consumable items, such as paper for printers, pens and so forth, and also depreciable items such as a desk and chair. It will also generally accept a reasonable deduction for utility costs such as heating and lighting, apportioned for the amount set aside for working from home.

The amount of depreciation that can be claimed for computers will depend on the degree of private use. Other devices may also have to have a “private use” portion of their cost, much as being able to claim a portion of heating and lighting, for example. It is certainly not a good idea to “gild the lily” and try to claim too much, but again every claim should be within reasonable limits (if not outright provable).

Depreciable items have been given an “effective life” by the ATO (see more details here), which specifies how many years over which an item can be written off. Computers, for example, have been deemed to have an effective life of four years. It is then a matter of apportioning the percentage of work-use for the item in question, and making the appropriate claim.

So while the interaction of electronic devices in our lives has made everyday tasks easier (consider how managing our money has been changed by electronic banking, for example), the complication these work/life tools bring is the setting aside of costs to make a tax claim. But completely neglecting to make the effort could see your client miss out on some valuable, and legitimate, tax deductions.

Claims for electronic devices, phones. Claims for electronic devices, phones. Claims for electronic devices, phones. Claims for electronic devices, phones.

Post a comment