In today’s digital age, mobile phones have become an essential tool for both personal and professional use. Many individuals use their mobile phones and devices for work-related purposes, such as making work calls, accessing online services, and staying connected while on the go. The Australian Taxation Office (ATO) recognizes the significance of mobile phone and device usage for work and provides tax deductions for eligible taxpayers. In this article, we will explore the eligibility criteria, calculation methods, and record-keeping requirements for claiming mobile phone tax deductions in Australia.
Eligibility to Claim Mobile Phone Calls and Mobile Internet
To claim a deduction for mobile phone calls and mobile internet expenses, certain conditions must be met. Firstly, the expenses must be incurred and used for work-related purposes. This means that the calls or data usage must directly contribute to performing work duties. Additionally, taxpayers must have records of their expenses, including how they calculated their work-related phone calls and data. It’s important to note that only the work-related portion of the expenses can be claimed as a deduction.
Similarly, home phone and internet expenses for work purposes follow similar rules and eligibility criteria.
Taxpayers can also claim deductions for the cost of mobile phones (handsets or smartphones) and other devices used for work purposes. The eligibility criteria include incurring the cost and using the item for work duties. Taxpayers must determine whether they can claim the cost of the item in the income year of purchase or the decline in value over its effective life. Records of expenses and usage of the item must be maintained, and the deduction can only be claimed for the work-related use of the device.
Calculating the Deduction
When calculating the deduction for mobile phone and data use, taxpayers have two options: claiming incidental use or calculating actual expenses. Incidental use refers to expenses of $50 or less, for which basic records are required to support the claim. The ATO allows deductions of $0.75 for work phone calls made from the mobile phone and $0.10 for work-related text messages sent from the device.
For actual expenses, taxpayers need to keep detailed records and written evidence to accurately determine their work-related use. The calculation depends on whether the phone bills itemize usage or not. If the bills provide itemized details, taxpayers can determine the work-related percentage of phone calls and data over a continuous 4-week period and apply it to the full income year. On the other hand, if the bills do not provide itemized details, taxpayers need to keep a record of work-related and private phone calls and internet usage over a 4-week period and calculate the claim based on a reasonable basis.
Proper record-keeping is crucial when claiming mobile phone and device deductions. Taxpayers must maintain records such as diary entries, bills for mobile phone and internet services, receipts for device purchases, and evidence of using the myGovID app for work purposes. The ATO emphasizes the importance of records when claiming deductions for mobile phone expenses, especially when claiming the decline in value of an asset. However, for incidental expenses of $50 or less, specific records may not be required.
Exceptions and What Cannot be Claimed
It’s important to understand the exceptions and expenses that cannot be claimed as deductions. Taxpayers cannot claim deductions for mobile phone and internet usage for private purposes, such as personal calls and texts to family and friends. Expenses incurred while seeking employment cannot be claimed either, as they are not generating employment income. Additionally, installation and set-up costs for mobile phones and devices, expenses reimbursed by someone else, and expenses for devices supplied by someone else are not eligible for deductions.
Types of Mobile Phones and Devices
Taxpayers can claim deductions for various types of mobile phones and devices used for work purposes. This includes smartphones, tablets, laptops, and other portable electronic devices. The eligibility for claiming deductions remains the same, focusing on the work-related use and proper record-keeping.
If an employer provides a mobile phone to an employee, the rules for claiming deductions differ. If the employer covers the cost of usage and the phone is used primarily for work purposes, employees generally cannot claim deductions for expenses related to that phone. However, if the employee incurs some of the costs or uses the phone for personal purposes, they may still be eligible to claim deductions for the work-related portion of their expenses.
Proper Allocation of Expenses
To ensure accurate deductions, it’s important to allocate expenses correctly between work-related and private use. Taxpayers should keep records that demonstrate how they calculated the work-related portion of their mobile phone and device expenses. This can include call logs, data usage records, and any other relevant documentation that supports the allocation.
Consulting a Tax Professional
Taxation laws and regulations can be complex, and individual circumstances vary. It’s always a good idea to seek advice from a qualified tax professional or refer to the Australian Taxation Office (ATO) website for specific guidelines related to your situation. They can provide personalized guidance and help ensure you understand the eligibility criteria, record-keeping requirements, and calculation methods for claiming mobile phone and device deductions.
This article is for general information only. It does not make recommendations nor does it provide advice to address your personal circumstances. To make an informed decision, always contact a registered tax professional.