Claiming personal technology as a tax deduction

B2B Editor6 February 2015

As personal technology devices such as laptops, smartphones and tablets, are becoming increasingly prevalent, the ATO will be focusing its attention on individuals claiming tech items as work-related tax deductions.

Currently, Australians claim almost $19.5 billion each year in work related expenses, and an increasing number of tech items are being included each year.

It is common for individuals to use such items for both business and personal use, leading to some complexities in claiming them as a tax deduction.

If you are using a tech item for both business and personal use, then you can only claim a tax deduction for the portion equivalent to what you use for business purposes. For instance, if you have a laptop that you use 60% for business use and 40% for personal use then you can only claim 60% of its depreciation each year as a tax deduction.

If an item is valued at over $300 then you cannot claim the entire cost as a tax deduction in the year of purchase. You will instead need to calculate the depreciation each year. Allowances for depreciation for personal technology devices are determined by the ATO.

In light of the ATO announcement, it is advisable to retain all documentation relating to both the purchase and the breakdown of your use of any tech related expenses.

If you have concerns about your ability to provide the ATO with proof of business use, you may wish to make brief diary entries recording your use over a representative period of at least 12 weeks as this is considered an acceptable form of proof.

There may be other costs associated with tech devices, such as repairs or interest paid on a loan for the purchase that you can also claim as tax deduction. Again, you can only claim the portion equivalent to what you use for business purposes.

The ATO also distinguishes between an upgrade and a repair: the cost of an upgrade over $300 needs to be depreciated annually, whereas the business portion of the full value of a repair can be claimed in the year of purchase.

If an employer is willing, an alternative to purchasing certain tech items personally is to salary sacrifice the purchase. There will be fringe benefits tax implications but overall such arrangements, depending on both your and your employer’s circumstances, may provide a better outcome

If you would lie some guidance or advice on this subject, please contact Ken Johnston at RSM BirdCameron on 02 6217 0311 or [email protected].