If you buy tools, equipment or other assets to help earn your income, you can claim a deduction for some or all of the cost.
If you use the tools for both work and private purposes you will need to apportion the amount you claim. If you have a computer that you use for private purposes for half of the time you can only deduct 50% of the cost.
The type of deduction you claim depends on the cost of the asset:
- for items that aren’t part of a set and cost $300 or less, or form part of a set that together cost $300 or less, you can claim an immediate deduction for their cost
- for items that cost more than $300, or that form part of a set that together cost more than $300, you can claim a deduction for their decline in value.
Examples of tools, equipment or assets
- Computers and software
- Desks, chairs and lamps
- Filing cabinets and bookshelves
- Hand tools, such as spanners, hammers and screwdrivers or power tools, such as grinders, sanders and hammer drills.
- Protective items, such as hard hats, safety glasses, sunglasses, sunscreens and cosmetics containing sun protection
- Professional libraries
- Safety equipment
- Technical instruments
You can also claim the cost of repairing and insuring your tools and equipment and any interest on money you borrowed to buy these items.
If you use items for both personal and work-related purposes you need to keep records, such as a diary to show the purpose of use of the item. So that, if requested, you can show how you apportioned the amount of personal and work-related use.
Handbags, briefcases and satchels
You may be able to claim a deduction for a handbag, briefcase or satchel you buy to carry items you are required to use and carry for your work, such as laptops, tablets, work papers or diaries. The amount of the deduction will depend on the how much you use the bag for work purposes.
You can’t claim a deduction if you mainly use the bag for personal purposes, such as carrying your lunch and beauty and hygiene products. This is private use.
When you use the bag for both private and income producing purposes, you may need to apportion the deduction you claim based on the amount of time you use the bag for work and for private purposes.
Where you use the bag for work purposes and it costs less than $300, you can claim the deduction immediately. Where the bag costs more than $300, you will generally work out any deduction using its effective life.
Example – allowable deduction for a handbag
Elizabeth buys a handbag for $150 to carry her tablet and work diary between appointments with clients The handbag is only used to carry the work items and she carries another bag for her personal items. She does not use the handbag that carries her tablet outside of work hours. As she is required to use the tablet and diary for her work the bag is being used for the production of assessable income, Elizabeth can claim a deduction.
Example – no deduction is allowable for a satchel
Arki buys a messenger satchel for $220 to carry his lunch and snacks, personal medical kit and private grooming items. He also uses it to carry a mini tablet, which he uses in his income producing occupation.
Arki also carries the satchel outside of work hours. This means the satchel is not mainly used for the purposes of producing assessable income. Arki is not able to claim a deduction for the satchel.
Example – apportioned deduction for a handbag
Theresa buys a large handbag for $280 to replace her current handbag, as she is now regularly required to take a small laptop type item and client paperwork to and from work. She continues to use her handbag to carry personal items and takes it with her outside of work hours. The large handbag is being used for both income producing and private purposes so the deduction would need to be apportioned between both uses.
End of example
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This reading material was extracted from Australian Tax Office (ATO) website on 24 June 2020. This post and the information therein is for general information only and does not constitute legal, financial or taxation advice from PTB. Other requirements under tax law may apply and may change. If you wish to act on any of the material in this video, you should contact PTB for professional advice that takes into account your own specific circumstances.