$300 rule (immediate expense)

[heroine]

So I'm trying to get as much as possible of my ongoing mtce / reno costs to fit under $300 rule (Capital allowances: $300 immediate deduction)

http://www.ato.gov.au/Individuals/Income-and-deductions/In-detail/Deductions-for-work-related-expenses/Capital-allowances--$300-immediate-deduction-tests/

I am wondering whether any associated labour is added or not?

For example, if I have a plumber go in and replace four sets of taps (60$ each => 240 total) and he charges me $100 for the labour, can I claim 240 for the "assets" as capital allowance and the labour as maintenance? Or are they added up as one "project"?

And how similar is "identical" - if I get two ceiling fans with light and three normal ones (2*90+3*50 =330) and a sparkie charges me 200 to put them up - can I claim 180 for light / fans, 150 for fans and 200 for the sparkie?

Thanks!

 

[Rob G.]

Tap replacement is settings. This forms part of your area for claiming capital works.

As regards your purchasing multiple items, attempts to circumvent this are a part of the standard audit checklist.

Here is an extract from the Explanatory Memorandum to the Uniform Capital Allowances which provides guidance on the "purpose" of the legislation.

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Immediate decline in value for assets costing $300 or less

1.72 An immediate deduction for depreciating assets costing $300 or less will be available to taxpayers who:

• use the asset predominantly for the purpose of producing assessable income that is not from carrying on a business;

• do not acquire the asset as part of a set of assets costing more than $300 and acquired in an income year; and

• do not acquire with one or more assets that are either identical or substantially identical in an income year where the total cost of these acquisitions is more than $300.

The second criterion ensures that taxpayers cannot disaggregate a set of assets by buying individual items from the set (each costing $300 or less) rather than buying the set itself (which costs more than $300) and claiming the immediate deduction. In addition, the third criterion ensures that taxpayers cannot claim an immediate deduction for identical (or substantially identical) assets acquired in an income year where the individual item costs $300 or less but collectively they cost more than $300. For example, a landlord with a furnished rental property cannot claim the immediate deduction in an income year for buying 2 identical lamps which individually cost $280. [Schedule 1, item 1, subsection 40-80(2)]

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So if you think that interpreting the word "identical" narrowly will open the floodgates for deductions then remember that the Acts Interpretation Act require courts to consider legislative purpose rather than the letter of the law. In this respect the EM is to be considered.

Therefore "substantially identical" will also be interpreted as meaning wider than "identical".

Even if you win a technical legal interpretation victory, the Commissioner could argue that the decision to purchase one or more fans without lights was for a dominant purpose of obtaining a tax benefit. Part IVA can strike down any "legal" arrangement.

Cheers,

Rob

 

[skater]

I'm not an accountant, so this is my understanding only.

If you purchase the items separately, then you pay for the labour, you would get two tax invoices. One for the items, the other for the labour. If the items come to over $300, then suck it up (it isn't that big a deal anyway) and if the labour component is less, then you could claim that. BUT if they come on the one invoice, then it will definitely be over $300, so you will have to use the low value pool.

 

[syba]

With the taps, what Rob said is correct - they are not depreciable assets so you cannot use any low value write offs, etc. If the taps were replaced as general maintenance and not as part of a bigger reno, then you may be able to claim them as a repair and write them off, but it doesn't sound like this was the case, so they are capital works and written off over 40yrs (at 2.5%)

With the fans, the cost you depreciate is the total cost to install. That may include the supply cost, delivery and installation fee. You paid $200 to install them so they basically cost $40 to install each. This is added to each fan or fan/light to get the cost each, which would be $90 and $130 respectively. Whilst they are <$300 each, in total they are >$300.

The ATO would consider all to be substantially identical as they are all ceiling fans, albeit some have lights. Whether they are on one receipt or 10 is irrelevant - they were all purchased in the same financial year therefore they are all "substantially identical" items purchased that year, therefore the <$300 write off doesn't apply. You can however add them to the <$1,000 low value pool and write them off that way.

If you did want to claim them as <$300 items, you would have to split the costs over 2 or more financial years so that each FY is <$300.

 

[GaryT]

Or if you owned the dwelling jointly with your partner then you get $300 each so effectively the cost threshold is $600.