Part 4 Tax Deduction Series – Tools, Equipment and Other Assets

As mentioned in our blog post on the 21st June 2017, this week we continue our multi part series on Tax Deductions for individuals. In today’s issue, we focus on Tools, Equipment and Other Assets.

Depending on your industry, you may be entitled to claim a deduction for expenses related to the purchase of Tools, Equipment or Other Assets. To claim a deduction, there needs to be a connection between the tools, equipment or assets you acquire and the income you derive.

If it can be established that there is a nexus or connection to the tools, equipment or assets acquired and the income you derive then you will be entitled to claim a deduction for some or all of the cost. However, If the tools are used for both work and private purposes, you will need to apportion the amount you claim. Say for instance, you have a computer that is used for both work and private purposes and you used it 50% of the time for work and 50% for private purposes, you will only be able to claim a deduction for 50% of the cost.

The type of deduction you will be able to claim depends on the cost of the asset:

  • For items that don’t form part of a set and cost $300 or less, of form part of a set that together costs $300 or less, you will be entitled to an immediate deduction for their cost.
  • For items that cost more than $300 or form part of a set that together cost more than $300, you can claim a deduction for their decline in value. This means that instead of getting an immediate deduction in the full year, you will claim a deduction for the life of the asset under depreciation.

Some examples of tools, equipment or assets and their effective lives (for assets over $300 per TR 2017/2) are as follows:

  • Calculators
  • Computers and Software (Effective Life – Laptop/Tablet 2 years, Desktop 4 years)
  • Desks, Chairs and Lamps (Effective Life – Desk 20 years, Chairs 10 years)
  • Filing Cabinets and Bookshelves (Effective Life – Filing Cabinet 15-20 Years, Bookshelves 15-20 years)
  • Hand Tools and Power Tools (Effective Life – Hand Tools 10 years, Power Tools 3-5 Years)
  • Professional Libraries (Effective Life – 10 years)
  • Technical Instruments

For the above assets that are above $300, the deduction will fall under the decline in value method or depreciation as mentioned before.

It is also important to note that the cost of repairing and insuring your tools and equipment and any interest on money you borrowed to acquire these items is also deductible.

We hope the above has assisted you in some way in understanding what you may be entitled to claim when it comes time to preparing your income tax return. If you would like any further information on the above or wish to discuss with our office in more detail, please feel free to contact us.

In our next issue, we will be focusing on other deductions that you may be entitled to claim as a taxpayer such as mobile phone costs, overtime meals, union fees and other expenses you may or may not be aware of.

ChalkBoard Consultancy Co.

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