Digital ID – claiming deductions for phone and internet expenses

Example 1: small business owner purchases mobile device

Angus is a sole trader and operates a landscaping business. As a small business owner, he isn't required to be registered for GST and is eligible to use the instant asset write-off.

During 2020–21, Angus purchases a tablet, keyboard and stylus for business use. The total cost is $1,200. Angus also enters into a contract for a mobile data plan for the device, which costs $75 a month. Angus uses the device to draw plans, produce quotes and invoices, send and receive emails, do all of his bookkeeping and manages his tax obligations.

From 1 March 2021, Angus also uses the device to set up a myID to access the Online services for business. Angus doesn't use his device or accessories for private purposes.

What Angus can claim as deductions

Angus claims a deduction of $900 ($75 a month × 12) for his mobile data plan in his tax return.

As each item, the tablet, keyboard and stylus, cost less than the instant asset write-off threshold, he can also claim the full amount of each as a deduction ($1,200) in his tax return for the first year he uses these items.

In his tax return for 2020–21, Angus claims a deduction of $2,100 ($900 + $1,200).

End of example

Example 2: asset used for business and private use

Joh is a sole trader and needs to upgrade his mobile phone which he uses his myID on to access ATO online services. He decides to upgrade his laptop at the same time.

Joh purchases a new laptop for $1,300 and a mobile phone for $1,100 on 1 February 2020. He continues to use his previous mobile plan with his new mobile phone, which costs $50 a month.

Joh only uses his new laptop for his business. Based on his itemised bills and other records he maintains during the income year for use of his old and new mobile phones, Joh works out that he used his phone 80% for business purposes for the entire year of income.

Joh is registered for GST and lodges a quarterly BAS.

What Joh can claim

The cost of Joh's laptop is less than the instant asset write-off threshold and he only uses it for his business. He claims the full cost of the laptop as a deduction in his 2019–20 tax return, less the GST credits he claimed in his March quarterly BAS.

The cost of Joh’s new phone is also less than the instant asset write-off threshold. But because Joh uses his phone for both business and private use, he apportions its purchase price and the cost of his monthly plan (after excluding the GST credits claimed) at 80% business use.

Joh calculates the GST credit (rounded down to whole dollars) that he can claim in his March quarterly BAS as follows:

• computer – $1,300 × 1/11 = $118
• mobile phone – $1,100 × 1/11 = $100 × 80% = $80
• mobile phone plan – $50 × 3 months = $150 × 1/11 = $13.64 × 80% = $10
• total GST credit for March quarterly BAS = $118 + $80 + $10 = $208.

Total GST credit (rounded down to whole dollars) for September, December and June quarterly BAS for mobile phone plan = $10.

Joh calculates his deduction for his new computer, mobile phone and his monthly plan as follows:

Computer

= $1,300 − $118

= $1,182

Mobile phone

= ($1,100 − $100) × 80%

= $800

Monthly plan

= (($150 − $10) × 4 quarters) × 80%

= $448

Total deduction for mobile phone and plan = $800 + $448 = $1,248.

In his 2019–20 tax return, Joh claims a deduction of $1,182 for his laptop and a deduction of $1,248 for his mobile phone expenses.

End of example

Example 3: medium-sized business provides employees with mobile devices on data plans

AXK Pty Ltd operates a medium-sized business with a turnover under $50 million, and 1,000 employees. Forty employees require access to Online services for business to carry out their duties.

On 3 February 2021, AXK Pty Ltd purchases 40 smartphones for these 40 employees. AXK Pty Ltd pays $385 (including GST) for each smartphone.

It also sets up plans for each smartphone to cover calls, internet access and data for $50 a month per smartphone (including GST).

AXK Pty Ltd also gives these 40 employees authorisation to access Online services for business through Relationship Authorisation Manager (RAM).

These employees will use their smartphones to:

• set up a myID
• log in to our online services using their myID
• make and receive work calls.

When AXK Pty Ltd issues the smartphones to its 40 employees, it makes it clear the smartphones are to be used primarily for work purposes. Therefore, AXK Pty Ltd's provision of the smartphones will be exempt from fringe benefits tax.

What AXK Pty Ltd can claim

In its business activity statement (BAS) for the quarter ended 28 February 2020, AXK Pty Ltd claims a credit of $1,400 (($385 × 1/11) × 40) for the GST paid on the purchase of the 40 phones. In that same BAS and in each one after that, for the duration of the phone plans, AXK Pty Ltd claims a credit for the monthly GST amount on the phone plans (($50 × 1/11) × 40 = $182 a month).

As the expense of each smartphone is less than the instant asset write-off threshold, AXK Pty Ltd claims a deduction for the full cost of each smartphone in the first year of use, less the amount of GST credits they already claimed in their BAS. AXK Pty Ltd's deduction for the smartphones in the 2020–21 year is $14,000 ($350 × 40).

AXK Pty Ltd also claims a deduction for the expense of the 40 monthly plans, reduced by the GST credits claimed in its BAS. AXK Pty Ltd's deduction for the plans in the 2020–21 year is $7,272 ($45.45 a month × 40 × 4 months).

In its 2020–21 tax return, AXK Pty Ltd claims a deduction $21,272.

End of example