The ATO has issued an information sheet setting out how taxpayers can claim phone and internet expenses.
Basically, it revolves around taxpayers keeping a 4-week diary so they can apportion the expenses between work and private use.
Unfortunately, unlike the person*, or persons*, responsible for this information sheet, other workers are generally not mentally attuned to this sort of regime of keeping such a diary.
That said, clients will still expect their tax agent to claim the highest amount possible.
Now that this unfortunate document has seen the light of day, tax agents will need to advise those clients who made a similar claim in their 2015 return, that they will need to keep a 4- week diary – every year!
The fun will start next year when the clients come in with no diary, and high expectations of a big refund!
(*) An ATO investigator once told us that, at the ATO, they have to do so much paperwork for something simple like taking an ATO car out that they find paperwork like this run-of the-mill. No wonder they think a 4-week diary is normal!
Where taxpayers use their own phone(s) or internet for work purposes, they may be able to claim a deduction if they paid for these costs and have records to support their claims.
If they use their phone(s) or internet for both work and private use, they will need to work out the percentage that reasonably relates to their work use.
To claim a deduction of more than $50, taxpayers need to keep records for a 4-week representative period in each income year.
These records may include:
If a taxpayer’s work use is incidental and they are not claiming a deduction of more than $50 in total, they may make a claim based on the following, without having to analyse their bills:
Taxpayers who receive an itemised bill will need to determine their percentage of work use over a 4-week representative period which can then be applied to the full year.
They need to work out the percentage using a reasonable basis.
This could include:
Taxpayers on a phone plan where they don’t receive an itemised bill, should determine their work use by keeping a record of all their calls over a 4-week representative period, and then calculate their claim using a reasonable basis.
Bundled phone and internet plans
Phone and internet services are often bundled. When taxpayers are claiming deductions for work-related use of one or more services, they need to apportion their costs based on their work use for each service.
If other members in their household also use the services, they need to take into account their use in the calculation.
Taxpayers with bundled plans need to identify their work use for each service over a 4-week representative period during the income year.
This will allow them to determine their pattern of work use, which can then be applied to the full year.
A reasonable basis to work out their work- related use could include:
Example – Apportioning bundled services
Mary has a $100 per month home phone and internet bundle.
The bill identifies that the monthly cost of Mary’s phone service in her bundle is $40, and her internet service is $60.
She also has a mobile phone plan of $90 per month, and receives a $10 per month discount.
Her total costs for all services are $180 per month.
Mary worked for 11 months during the income year, having had one month of leave.
Based on her itemised accounts, Mary determines that the work-related use of her mobile phone is 20%.
She also uses her home internet for work purposes and, based on her use, she determines that 10% of her use is for work. She does not use her home phone for work calls.
As the components are part of a bundle, Mary can calculate her work-related use as follows:
Home internet use
10% x $60 per month x 11 months = $66
Mobile phone use
20% x $80 x 11 months = $176
In her tax return, Mary claims a deduction of $242 for the financial year ($66 home internet use + $176 mobile phone use).
In the second example provided in the ATO’s document, the taxpayer has a $90 per month home phone and internet bundle, and unlimited internet use as part of his plan.
There was no clear breakdown for the cost of each service, so the ATO accepted that it is reasonable for the taxpayer to allocate 50% of the total cost to each service.
The ATO also stated that, if a taxpayer purchased a smart phone, tablet or other electronic device and uses it for work, they can claim a deduction for a percentage of its cost.