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Tax.Appeal.168
Tax.Appeal.168, Tax Accountant
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I'm a sole trader, running a web and graphic design business

Customer Question

I'm a sole trader, running a web and graphic design business and want to know about claiming expenses.
Can I claim the full amount for laptop / computer hardware purchases, ongoing software subscriptions, office furniture (or does this need to be depreciated), paint / office renovation expenses, Mobile Phone / Internet bill and all purchases for customers such as stock photos, web hosting etc.
In terms of record keeping is an excel sheet and invoices enough to record this?
Thank you
Submitted: 1 year ago.
Category: Australian Tax
Expert:  Tax.Appeal.168 replied 1 year ago.

Q1: Can I claim the full amount for laptop / computer hardware purchases, ongoing software subscriptions?

A1: No, the work related laptop usage has to be depreciated. SEE BELOW:

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Computer and laptop expenses

You can claim a deduction for the work-related portion ofthe:

  • decline in value (depreciation) of computers, laptops,printers, software and server routers
  • cost of repairs to your computer
  • interest on money borrowed to finance the cost of the computer
  • cost of internet access.

You cannot claim any deduction for decline in value(depreciation) of items used in your employment if they were provided to you by your employer.

If the computer, laptop or software cost more than $300, you must depreciate the asset via the decline in value process.

For computers, laptops and other equipment, there are two methods to work out depreciation:

  • the prime cost method
  • the diminishing value method.

Depreciation using the prime cost method is worked out as a percentage of the cost of the equipment. Depreciation using the diminishing value method is worked out initially as a percentage of the equipment's cost and then as a percentage of the written down value.

As a general rule, desktop computers are depreciated over a period of four years, and laptops can be depreciated over three years. You can claim an immediate deduction for the full cost of the item if it costs $300 or less.

If software is purchased as part of a computer system, the total cost of the system is depreciable. If software is purchased separately and costs more than $300, the decline in value (depreciation) is worked out using the prime cost method over a period of four years.

You must apportion the amount of your claim if the computer,laptop or internet has been used in part for private purposes. You need to keep a diary to record the amount of time you use your home computer and internet for work and private purposes. The diary must include a representative period of at least four weeks to establish a pattern of use for the whole year.

REFERENCE SOURCE:

https://www.ato.gov.au/Individuals/Income-and-deductions/In-detail/Deductions-for-specific-industries-and-occupations/IT-professionals---claiming-work-related-expenses/?page=21#Computer_and_laptop_expenses

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You can refer to the IT Professionals --Claiming Work Related Expenses Guide for information regarding the other inquiries. The guide should answer your questions regarding the other expenses. Refer to link below. Click on tabs to the left of the screen.

https://www.ato.gov.au/Individuals/Income-and-deductions/In-detail/Deductions-for-specific-industries-and-occupations/IT-professionals---claiming-work-related-expenses/

Let me know if I can be of further assistance to you regarding this matter.