laptops double dipping
- Thread starter NigelW
- Start date
Hi Nigel
Yes, it does. The definitions within the tax act of an employee include associates, and office holders.
Dale
Yes, it does. The definitions within the tax act of an employee include associates, and office holders.
Dale
Originally posted by NigelW
Another question for Dale
Somebody posted this some time ago
Does this also apply to directors of the company who are not PAYG employees?
Many thanks
N.
How can the employee claim this as a tax deduction if they do not have a receipt to substantiate the purchase?
Hmm on this basis an approximation of tax effect on cost
I buy a $1500 laptop
I claim back 30% company income tax thus $450
Thus company cost is $1050
Then I give it to myself ? as an offie tool of trade and I claim that at say 42% being $441
Thus it actually costs me $609 approx simple tax calcs only.
Almost a third the original price although I guess the personal claim must be over 3 years ? for a PC ?
I buy a $1500 laptop
I claim back 30% company income tax thus $450
Thus company cost is $1050
Then I give it to myself ? as an offie tool of trade and I claim that at say 42% being $441
Thus it actually costs me $609 approx simple tax calcs only.
Almost a third the original price although I guess the personal claim must be over 3 years ? for a PC ?
hdw007,
This is how I see it (concerning the laptop).
Laptop $1500
So the company can claim $136 back on GST straight away.
Then the company saves (by way of depriciation) (1500 - 136)*30% = $409 OVER 3 years.
Then You can claim it at your personal tax rate as well, so this will save you (1500 - 136)*48.5% = $661 OVER three years
So the real cost of a $1500 laptop, before tax, is only $430 !! AFTER tax, which is a considerable saving. (however this does not include the time value of money over the three year period , which would make it more like $600, like you find.)
this is how I would do it, but I might be wrong...
I wouldn't call a laptop a trade tool though. (I was more thinking about power drills, hand saws etc... in my previous post)
Nom
This is how I see it (concerning the laptop).
Laptop $1500
So the company can claim $136 back on GST straight away.
Then the company saves (by way of depriciation) (1500 - 136)*30% = $409 OVER 3 years.
Then You can claim it at your personal tax rate as well, so this will save you (1500 - 136)*48.5% = $661 OVER three years
So the real cost of a $1500 laptop, before tax, is only $430 !! AFTER tax, which is a considerable saving. (however this does not include the time value of money over the three year period , which would make it more like $600, like you find.)
this is how I would do it, but I might be wrong...
I wouldn't call a laptop a trade tool though. (I was more thinking about power drills, hand saws etc... in my previous post)
Nom
Nom, surely the company can't claim depreciation if the employee claims it. Surely only the owner of the asset can claim that. I would have thought the company claims an immediate right off of the whole cost, as they have given it to the employee and thus it is an expense to the company and they have released ownership of the asset to the employee.
The company pays a fringe benefits tax on the laptop at 48.5% ouch ! Perhaps they don't pay it but it just for calculation of a grossed up value. But perhaps they may pay the payroll tax on it. But the grossed up value of the asset after FBT will be included in the employees group certificate payment summary and although not taxable on this grossed up value to the employee, The total will, however, be included in a number of income tests relating to the following government benefits and obligations: eg medicare levy assessment etc...
It's a bit like wages being paid to an employee but instead its a laptop worth the equivalent of $1500 in wages. Thus the company claims an immediate right off of the full value as an expense. The employee then depreciates it and claims that.
I could be wrong as I no next to nothing about this stuff.
I'm confused. Surely FBT makes this a questionable strategy.
So give it as a gift as you are giving it to yourself as an employee and family member. But then you have to be careful in claiming depreciation on the gift which cannot be used for the main purpose of the entity. so you could only claim 49% of the depreciation of the gift I presume. 51% of the gift is for personal use and thus this becomes its main purpose. I presume the company can right off the gift as an expense. But then unless you as an individual are a designated deductible gift recipient ( DGR ) then you cannot claim any deduction for receiving the gift. ( most of us ) Thus if you are an employee of your own company, it may be seen as a fringe benefit, if its passed from the company to you personally.
im way over my head here, I better stop. A little knowledge can be dangerous. :/
The company pays a fringe benefits tax on the laptop at 48.5% ouch ! Perhaps they don't pay it but it just for calculation of a grossed up value. But perhaps they may pay the payroll tax on it. But the grossed up value of the asset after FBT will be included in the employees group certificate payment summary and although not taxable on this grossed up value to the employee, The total will, however, be included in a number of income tests relating to the following government benefits and obligations: eg medicare levy assessment etc...
It's a bit like wages being paid to an employee but instead its a laptop worth the equivalent of $1500 in wages. Thus the company claims an immediate right off of the full value as an expense. The employee then depreciates it and claims that.
I could be wrong as I no next to nothing about this stuff.
I'm confused. Surely FBT makes this a questionable strategy.
So give it as a gift as you are giving it to yourself as an employee and family member. But then you have to be careful in claiming depreciation on the gift which cannot be used for the main purpose of the entity. so you could only claim 49% of the depreciation of the gift I presume. 51% of the gift is for personal use and thus this becomes its main purpose. I presume the company can right off the gift as an expense. But then unless you as an individual are a designated deductible gift recipient ( DGR ) then you cannot claim any deduction for receiving the gift. ( most of us ) Thus if you are an employee of your own company, it may be seen as a fringe benefit, if its passed from the company to you personally.
im way over my head here, I better stop. A little knowledge can be dangerous. :/
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Hi
No, the individual buys the laptop and claims depreciation, as normal.
Then, his/her employer reimburses the individual for the laptop making it a cashflow neutral cost to the individual.
The employer claims the reimbursement as an immediate tax deduction and does not need to depreciate the laptop.
It's strange, but, it is perfectly legal, and, has been around for some time.
Dale
No, the individual buys the laptop and claims depreciation, as normal.
Then, his/her employer reimburses the individual for the laptop making it a cashflow neutral cost to the individual.
The employer claims the reimbursement as an immediate tax deduction and does not need to depreciate the laptop.
It's strange, but, it is perfectly legal, and, has been around for some time.
Dale
Hi
It looks like we've opened a can of worms here, and for that, I apologise.
As with anything on the forum . . . do your own due dilligence and don't just blindly accept what anyone tells you. Ask your own accountant about the discussion and if it applies to your circumstances and even then, only do this if it suits you and your comfort with the startegy.
And, for those of you need proof - try . . .
TD 93/145
--------------------------------------------------------------------------------
FOI status: may be released
--------------------------------------------------------------------------------
Taxation Determination
Income tax: is an employee entitled to a deduction for depreciation in relation to an item of plant used for income producing activities when he or she is subsequently reimbursed for the cost of the item?
--------------------------------------------------------------------------------
This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953 , is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, this Determination applies to years commencing both before and after its date of issue. However, this Determination does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).
1. Yes. Section 51AH of the Income Tax Assessment Act 1936 does not apply to reduce a deduction for depreciation.
2. If an employee is reimbursed in respect of an amount of a tax deductible work-related loss or outgoing and the reimbursed amount is not included in the employee's assessable income, section 51AH applies to reduce the amount of the loss or outgoing allowed or allowable to the employee by the amount of the reimbursement.
3. However, if the employee is reimbursed for the cost of an item of plant used for income producing activities, section 51AH does not apply to reduce a deduction for depreciation because the reimbursement is not in respect of a deductible loss or outgoing allowed or allowable to the employee. In our view, depreciation is not a loss or outgoing for the purposes of section 51AH.
4. The depreciation provisions (section 54 and associated provisions) allow the owner of an item of plant to deduct the capital cost of the item over its effective life. The annual depreciation amount is calculated by reference to the cost or depreciated value of the plant and the appropriate prime cost or diminishing value rate applicable to its effective life.
5. Where effective life is less than 3 years, or the initial cost does not exceed $300, the depreciation rate is 100% for plant acquired after 1 July 1991 unless the taxpayer nominates a depreciation rate of less than 100% (subsection 55(2)). The deductible amount of depreciation is based on the period and the extent to which the property is used for income-producing activities.
6. If plant acquired by an employee is used in income producing activities then the employee is entitled to a deduction for depreciation. Where the employee is subsequently reimbursed by his or her employer for the cost of the item, that reimbursement is not taken into account in calculating the deductible amount of depreciation because the reimbursement is, in general, a separate transaction which does not affect the initial cost of the item.
7. However, if the cost of the item is subject to a discount or rebate on the acquisition of the property, then the cost for depreciation purposes is the cost after the amount of the discount or rebate is deducted.
Example
Employee X acquires a computer and a briefcase for work-related activities at a cost of $3,000 and $150 respectively. X's employer subsequently reimburses X for the total cost of the briefcase and part of the cost of the computer.
The briefcase is used by X solely for work-related activities and the computer is used 70% of the time in work-related activities. X is entitled to calculate the annual depreciation amount based on the initial costs of $3,000 and $150. The deductible amount in relation to the computer would be limited to 70% of the annual depreciation amount.
--------------------------------------------------------------------------------
Commissioner of Taxation
29/7/93
--------------------------------------------------------------------------------
Previously issued as Draft TD 93/D59 &
TD 93/D60
ATO references:
NO CAN AC752 Pt5
FOI number: I 1215713
ISSN 1038 - 8982
Subject References:
depreciation;
employee;
reimbursement;
work-related expenditure
Legislative References:
ITAA 51AH;
ITAA 54;
ITAA 55(2)
It looks like we've opened a can of worms here, and for that, I apologise.
As with anything on the forum . . . do your own due dilligence and don't just blindly accept what anyone tells you. Ask your own accountant about the discussion and if it applies to your circumstances and even then, only do this if it suits you and your comfort with the startegy.
And, for those of you need proof - try . . .
TD 93/145
--------------------------------------------------------------------------------
FOI status: may be released
--------------------------------------------------------------------------------
Taxation Determination
Income tax: is an employee entitled to a deduction for depreciation in relation to an item of plant used for income producing activities when he or she is subsequently reimbursed for the cost of the item?
--------------------------------------------------------------------------------
This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953 , is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, this Determination applies to years commencing both before and after its date of issue. However, this Determination does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).
1. Yes. Section 51AH of the Income Tax Assessment Act 1936 does not apply to reduce a deduction for depreciation.
2. If an employee is reimbursed in respect of an amount of a tax deductible work-related loss or outgoing and the reimbursed amount is not included in the employee's assessable income, section 51AH applies to reduce the amount of the loss or outgoing allowed or allowable to the employee by the amount of the reimbursement.
3. However, if the employee is reimbursed for the cost of an item of plant used for income producing activities, section 51AH does not apply to reduce a deduction for depreciation because the reimbursement is not in respect of a deductible loss or outgoing allowed or allowable to the employee. In our view, depreciation is not a loss or outgoing for the purposes of section 51AH.
4. The depreciation provisions (section 54 and associated provisions) allow the owner of an item of plant to deduct the capital cost of the item over its effective life. The annual depreciation amount is calculated by reference to the cost or depreciated value of the plant and the appropriate prime cost or diminishing value rate applicable to its effective life.
5. Where effective life is less than 3 years, or the initial cost does not exceed $300, the depreciation rate is 100% for plant acquired after 1 July 1991 unless the taxpayer nominates a depreciation rate of less than 100% (subsection 55(2)). The deductible amount of depreciation is based on the period and the extent to which the property is used for income-producing activities.
6. If plant acquired by an employee is used in income producing activities then the employee is entitled to a deduction for depreciation. Where the employee is subsequently reimbursed by his or her employer for the cost of the item, that reimbursement is not taken into account in calculating the deductible amount of depreciation because the reimbursement is, in general, a separate transaction which does not affect the initial cost of the item.
7. However, if the cost of the item is subject to a discount or rebate on the acquisition of the property, then the cost for depreciation purposes is the cost after the amount of the discount or rebate is deducted.
Example
Employee X acquires a computer and a briefcase for work-related activities at a cost of $3,000 and $150 respectively. X's employer subsequently reimburses X for the total cost of the briefcase and part of the cost of the computer.
The briefcase is used by X solely for work-related activities and the computer is used 70% of the time in work-related activities. X is entitled to calculate the annual depreciation amount based on the initial costs of $3,000 and $150. The deductible amount in relation to the computer would be limited to 70% of the annual depreciation amount.
--------------------------------------------------------------------------------
Commissioner of Taxation
29/7/93
--------------------------------------------------------------------------------
Previously issued as Draft TD 93/D59 &
TD 93/D60
ATO references:
NO CAN AC752 Pt5
FOI number: I 1215713
ISSN 1038 - 8982
Subject References:
depreciation;
employee;
reimbursement;
work-related expenditure
Legislative References:
ITAA 51AH;
ITAA 54;
ITAA 55(2)
" 5. Where effective life is less than 3 years, or the initial cost does not exceed $300, the depreciation rate is 100% for plant acquired after 1 July 1991 unless the taxpayer nominates a depreciation rate of less than 100% (subsection 55(2)). The deductible amount of depreciation is based on the period and the extent to which the property is used for income-producing activities. "
Hmm does this mean the PC can be written of 100% in 1 year by the employee, so long as its under $3000 or effective life is under 3 years?
So who decides the effective life of a PC ?
Hmm does this mean the PC can be written of 100% in 1 year by the employee, so long as its under $3000 or effective life is under 3 years?
So who decides the effective life of a PC ?
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very interesting. I am a little confused though. I have a work laptop which is not part of a formal salary sacrifice ie through a company that takes a fee, is it claimable? and what paperwork do I need? just a copy of the invoice? would I need a latter from my employer saying that it is a salary sacrifice?
Hi
The formal part of the process is best to limit arguements from the tax office if they were to attack. However, in many practical examples, a simple letter from your employer confirming that they will reimburse you the cost of the laptop computer if you buy one yourself should suffice.
Dale
The formal part of the process is best to limit arguements from the tax office if they were to attack. However, in many practical examples, a simple letter from your employer confirming that they will reimburse you the cost of the laptop computer if you buy one yourself should suffice.
Dale
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