Did you know you can claim deductions for tools and equipment you use for work? Yes, you’ve heard it right. But you must know what tools and equipment expenses you can claim as a deduction. In this blog, we’ll list tools and equipment eligible for deductions.
Eligibility to Claim Tool and Equipment Expenses
To claim a deduction for tools and equipment, you must:
- Use the items in carrying out your work duties
- Determine whether you can claim the full cost in the year of purchase or claim a deduction for the decline in value over the effective life
- Keep records of your expenses and how the items are used
If the items are used for both work and private purposes, you must apportion the deduction and only claim the work-related portion.
You may also claim deductions for the work-related portion of:
- repair and insurance costs for your tools and equipment
- interest expenses on money borrowed to purchase these items
What Deductions You Can’t Claim?
You are not eligible to claim a deduction for:
- Your use of the equipment or tools for personal use
- Expenses for equipment and tools that someone else supplies for your use.
What Types of Equipment and Tools Can Be Claimed?
You can claim the expense of tools and equipment that you use for work, such as:
- hand tools – for instance, hammers, spanners, and screwdrivers
- power tools – for instance, sanders, grinders, and hammer drills
- calculators
- cameras
- musical instruments
- safety equipment – for instance, steel cap boots or a hard hat
- technical instruments
- electric clippers and scissors
- phones and other devices
- laptops, computers, and software
- cases and bags
- stationery and office supplies
- office furniture and equipment
This is not an exhaustive list of tools or equipment you use for work.
How Do You Calculate Your Tools and Equipment Deductions?
Equipment and tools are usually depreciating assets that decline in value over time. How you work out your deduction will be based on whether the item costs:
- $300 or less
- More than $300
You are required to apportion your deduction if you use the tools or equipment for both work and personal use. You can claim the deduction in your tax return as other work-related expenses. You can engage professional taxation accountants to help you claim possible tax deductions.
$300 or less
An immediate deduction is applicable for a depreciating asset if:
- It costs $300 or less
- You use it to generate non-business assessable income
- It is not part of a set that costs above $300
- It is not one of a number of items that are identical or almost identical, costing over $300
You are required to meet the conditions of all 4 tests to claim an immediate deduction. You can claim a deduction for the decline in value of the depreciating asset if you can’t claim an immediate deduction.
More than $300
You are allowed to claim a deduction for the decline in value over the effective life of the depreciating asset if the tool:
- The cost is over $300
- Forms part of a set that together costs over $300
- is identical, or substantially identical to, other tools that together cost over $300.
Record-Keeping for Tools and Equipment
You have to keep accurate records to support your claim for work use of equipment and tools, such as:
- written evidence, such as receipts for items you purchase
- information about how the tool is used by you in performing your employment duties
- a record, such as a diary note, that demonstrates how you work out your percentage of work-related use.
If you are claiming the decline in value of an asset, you are required to keep records that show how you calculated the decline in value. You can opt for bookkeeping services Melbourne for accurate record-keeping.
Conclusion
The blog outlines what tools and equipment deductions you can claim for your work. If you find it difficult to gather information on what deductions you are eligible to claim, you can rely on Reliable Melbourne Accountants.