In this guide, you will learn about deductions for tools or equipment used for work, including the expenses of repairs and insurance.
Eligibility to claim tool and equipment expenses
To claim a deduction for tools and equipment costs, you need to:
- Use the items to perform your work responsibilities.
- Work out whether you are claiming the cost of the item in the income year you purchase it or the decline in value over its effective life.
- Have a record of expenses you incurred and use of the items.
You are required to apportion your deduction when you use the item for both personal and work purposes. You are also allowed to claim a deduction for the work-related part of:
- Expenses you incur to insure and repair your tools and equipment
- Interest expenses you incur on money you borrow to purchase these items.
What you won’t be able to claim
You won’t be able to claim a deduction for:
- Your use of the tools for personal purposes.
- Expenses for tools that someone else supplies for your use.
What types of tools can you claim?
You can claim the expense of tools and equipment that you use for work, such as:
- Hand tools – for example, hammers, spanners, and screwdrivers.
- Power tools – for instance, sanders, grinders, and hammer drills
- Cameras
- Calculators
- Musical instruments
- Safety equipment – for instance, steel-cap boots or hard hats.
- Technical instruments
- Electric clippers and scissors
- Phone and other devices
- Laptops, computers, and software
- Cases and bags
- Stationery and office supplies
- Office furniture and equipment.
This is not a complete list of tools you use for work.
How to calculate your tools deduction?
Tools and items are usually depreciating assets that decline in value over time. It depends on the cost of the item and how you work out your deduction:
- $300 or less
- More than $300
You are required to apportion your deduction if you use the tools for both work and personal purposes. You will claim the deduction in your tax return as other work-related expenses. For more information, you can speak to the best accountant in Melbourne.
$300 or less
An immediate deduction can be claimed for a depreciating asset if:
- It costs $300 or less
- You use it primarily to generate non-business assessable income
- It is not part of a set that costs over $300.
- It is not one of several items that are the same or almost the same, costing more than $300.
You may have to meet the conditions of all 4 tests to claim an immediate deduction. If you won’t be able to claim an immediate deduction, you can claim a deduction for the decline in value of the depreciating asset.
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 item:
- Costs over $300
- Forms part of a set that together cost over $300
- Is the same as, or substantially the same as, other items that together cost over $300.
Maintain proper records of tools and equipment
You are required to keep records to support your claim for tools and equipment used for work, such as:
- Written evidence for items you purchase.
- Information regarding how the item is used in carrying out your employment duties.
- A record that demonstrates how you work out your percentage of work-related use.
If you are claiming the decline in value of an asset, you also have to keep records that demonstrate how you calculated the decline in value.
Conclusion
The blog shares information about tools and equipment that you can claim as work expenses. If you are not sure about the method to claim these expenses, you can get in touch with Reliable Melbourne Accountants.