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How to: Make the most of tax time
by Tom Ravlic | May 23, 2017 | Comment Now
Are you claiming all of the deductions you are fully entitled to for your tech gear and services?
How to: Make the most of tax time

Tax law can be complex at the best of times and in the rush to get your records ready to lodge your tax returns you may forget what of your technology purchases during the past year you are able to claim as a deduction.

You might have your receipts in a shoebox, attached to e-mails or in credit card statements and are perplexed as to what you are able to claim as a work related expense when it comes to IT purchases.

It is not that hard provided you keep several basic principles in mind and the most important of these is that any IT purchase you want to claim must be related to the earning of assessable income. Ask yourself the following questions:

  • Are you using the piece of IT for business purposes?
  • Are you using it all the time for business purposes? Or is it only a proportion of the time?
  • How much did you pay for that piece of IT – under or over $300?

The answer to these questions will help you work out what it deductible and the extent to which you can write it off for tax purposes either immediately or over time. Let’s take a look at some things you need to think about.

Individuals

People who are only salaried employees will sometimes find that most of their tech spend will not be deductible because there is generally no connection earning income from their day job. Most savvy employers will provide their employees with all of their tech needs such as a laptop or desktop, a mobile phone if the employee is in a sales role and any other IT-related peripherals. One of the few areas where the tech spend may be deductible is the circumstance where you as an employee may use your personal phone for work calls. You need to be aware, however, that your entire bill cannot be claimed as a deduction just because you have used a private phone for work. 

One method of calculating the deduction is to look at the percentage of calls made on work-related matters rather than private matters. Assume that 20% of calls on a private mobile are for work purposes and the amount you pay for your mobile subscription is $600. The amount you are able to claim is $120 because the only calls that justify being claimed totalled 20%. There are other methods of calculating the costs of mobile phone calls. Check the ATO web site at www.ato.gov.au . Remember that the calls must be work related and not consists of invite to your mates for a couple of glasses at the local drinking hole.

If you are studying as a part of work-related professional development – courses related to your current role – then you may be able to claim a proportion of your internet costs for that purpose if it is an online course. Keep your telephone and internet- related invoices ready for the purpose so that you can justify any claim on the basis of self-study relevant to work. There is a tricky bit in this part of the law that you need to watch: the study must be relevant to work you do now rather than a position you may want to have at the future.

Software costs

Sole traders and small businesses will use licensed software such as office suites, desktop design packages and accounting software amongst other packages. Any licenses can be written down over the term of the license. Do you have a license for an anti-virus package for two years? The cost should be depreciated over two years because that is the length of the license.

You also need to bear in mind that software that comes preinstalled in a computer is taken to be a part of the system and the whole system is depreciated over the relevant period. This is because the unit is considered as one asset rather than its component parts.
If you buy software for a computer that is less $300 you can write it off automatically. Software bought for more than $300 must be depreciated over a four-year period. 

Desktop computers, tablets and laptops

Let’s get rid of the easy stuff first. Any tablets or laptops that are under $300 can be written off automatically. Any laptop or similar device must be depreciated over a three year period. Remember to make sure you keep your invoices so that you are able to substantiate the cost and any method used to depreciate the software. Desktops are treated a bit differently. They are depreciated over four years under the rules set down by the ATO. 

In order for an accountant to be able to do the tax numbers properly for you it will be necessary for you to keep a diary of your computer usage and how much the computer is actually used for business purposes. It is that proportion of the cost of the desktop or laptop that will be depreciated over the three or four year period. The ATO recommends keeping data for at least a month of your usage of the desktop or laptop in order to be able to claim the right amount for tax purposes.

Tricky shared economy stuff

It has actually become easier for people to start their own businesses and the newest businesses operate with technology as the interface with customers. 

You might decide to use phones with the relevant app and start a business offering rides to people in their private car, renting rooms or offering cleaning services. You need to be conscious of the fact that in these situations you have to make sure that you separate the expenses related to the ‘new economy’ activity from the private activities. This requires you to make diary notes about when you spoke to potential clients on the phone so that you can properly claim the expenditure.

One peculiarity remains for people who engage in taxi-like services such as Uber. You must be registered for GST irrespective of how much money you earn. It is a mandatory requirement. This means that you will need to ensure that you get an ABN and also lodge quarterly Business Activity Statements with the ATO. In other cases people running a business must be registered for GST if they turnover $75,000 or more.

An activity statement is simply the document that a person or business registered for GST must fill in to report how much GST they must remit to the tax office once the expenses on which GST has been paid and GST that has been collected from the sale of goods or services. A business must pay GST to the government if they collect more GST than they pay out in their expenses.

Consult a qualified tax expert

While there is a self-assessment regime that taxpayers take advantage of there is no substitute for seeking the advice of a qualified tax agent if you are in doubt. It is important that you check whether the accountant with whom you are having a conversation is registered with the Tax Practitioners Board (TPB). The TPB is the government body that registers tax and BAS agents. No individual is able to charge for tax advice unless they are registered with the TPB so it is critical that you check the credentials of the person you are considering to handle your financial affairs.

The TPB also has the ability to review the registration status of accountants who have been the subject of a complaint so there is some consumer protection in place.

There are a series of professional organisations that are recognised by the TPB as organisations that are able to have registered agents as members. The organisations listed include the larger accounting bodies in Australia: CPA Australia, Chartered Accountants Australia and New Zealand and the Institute of Public Accountants. Members of these bodies registered as tax agents are subject to two disciplinary regimes. 

Make sure that any agent you select is registered with the TPB in the first instance so that you know that they have cleared a compulsory hurdle for the provision of tax advice.


Disclaimer: the circumstances outlined in this feature have been provided for illustrative purposes only and advice on how the law applies to your specific circumstances must be sought from an appropriately qualified and registered practitioner. 

Tom Ravlic FIPA is a freelance journalist, accounting regulation expert and a lecturer at Deakin University.



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