Test 1 – asset costs $300 or less
To claim the immediate deduction, the cost of the depreciating asset must be $300 or less.
The cost of an asset is generally what you pay for it (the purchase price), and other expenses you incur to buy it – for example, delivery costs.
If you own a depreciating asset jointly with someone else, the portion of the asset you own is used to calculate the cost of the depreciating asset. For example, if you and someone else buy a depreciating asset for $500 and you each own 50% of the asset, the cost of the asset for you will be $250 (50% × $500).
Example: jointly held assets
Yousef and Giovani together buy a laptop for $1,000 to use for work. Yousef contributes $750 to the cost and Giovani contributes $250. They therefore own 75% and 25% of the laptop respectively.
Giovani may be able to claim an immediate deduction because the cost of his interest in the laptop doesn't exceed $300.
Yousef can't claim an immediate deduction as the cost of his interest exceeds $300. Yousef can claim the deduction for the decline in value for his portion of work-related use of the asset.
End of exampleWhere the cost is $300 or less, you can claim a deduction for the full purchase price in the year you buy it. However, if you use the asset for both private and work-related purposes, you must apportion your deduction. You can claim only the work-related portion of the cost.
Test 2 – you use the asset mainly to produce non-business assessable income
You use the asset mainly (more than 50% of the time) for the purpose of producing assessable income that is not income from carrying on a business.
As long as you meet this test, you can use the asset for other purposes (such as private purposes or to carry on a business) and still claim an immediate deduction. However, if you use an asset for private purposes, you must work out the work-related use of the asset and only claim the work-related portion of costs.
Some examples of assets employees use to produce non-business income include:
- a briefcase
- tools of trade
- computer or laptop.
Example: depreciating asset is not used mainly to produce assessable business income
Rob buys a calculator for $150. He uses the calculator 40% of the time in his sole-trader business and 60% of the time for his job as an employee bookkeeper. As the calculator is used more than 50% of the time for producing assessable income in his employee role, Rob can claim an immediate deduction of $150.
If Rob used his calculator 40% of the time for private purposes and 60% of the time for his job, he is still using the calculator more than 50% of the time for producing non-business assessable income. However, his deduction would be reduced by 40% to reflect his private use of the asset.
End of exampleTest 3 – the asset is not part of a set costing more than $300
To claim the immediate deduction, the asset must not be part of a set of assets you start to hold during the income year where the total cost is more than $300.
Whether items form a set is determined on a case-by-case basis. Items may be regarded as a set if they are either:
- interdependent on each other
- marketed as a set
- designed and intended for use together.
A set needs to have more than one depreciating asset. In some cases, a single depreciating asset may be made up of more than one item.
A group of assets bought in an income year can be a set in themselves. This is even if they also form part of a larger set you buy over more than one income year.
If the assets bought in an income year are a set, the total cost of that set must not exceed $300 to be able to claim an immediate deduction. If the total cost of the set bought in the same income year is more than $300, you can't claim an immediate deduction – see Assets costing more than $300.
Assets bought in another income year aren't taken into account when working out whether items form a set or the total cost of a set.
Example: set of items
Brenna, a sales manager, hears about a series of 6 progressive learning CDs. The CDs are designed to develop selling skills in stages. You move through to the next CD only when you are familiar with the lessons on the previous CD.
The CDs are marketed as a set and are designed to be used together. The 6 CDs would be regarded as a set. The 6 CDs cost $360 when bought as a set or individually for $60 each. Brenna buys one CD each week for 6 weeks in the same income year at a total cost of $360.
Although the cost of each CD is less than $300, Brenna can't claim an immediate deduction for the CDs because they are a set and the cost of the set is more than $300.
End of example
Example: items not forming part of a set
Mary buys some new tools for her work as a carpenter. She buys a shifting spanner, a boxed set of screwdrivers and a hammer for her toolkit.
Each item individually costs less than $300.
While these tools may comprise or add to Mary's toolkit, they're not a set because they are not interdependent or designed to be used together. It would make no difference if Mary bought the items at the same time and from the same supplier or manufacturer.
An immediate deduction is available for all the items, including the screwdrivers.
Even though the screwdrivers are marketed as a set – as the cost is $300 or less she can claim the full cost as an immediate deduction.
End of exampleTest 4 – asset is not one of a number of items that are identical or substantially identical
To claim the immediate deduction, the asset must not be one of a number of identical, or substantially identical assets, you start to hold during the income year that together costs more than $300.
You need to work out whether the depreciating asset is identical or substantially identical to other depreciating assets you buy in the same income year. You don't take items into account that you acquired in another income year.
Items are identical if they are the same in all respects.
Items are substantially identical if they are the same in most respects even though there may be some minor or incidental differences.
Factors you would consider include colour, shape, function, texture, composition, brand and design.
Example: identical or substantially identical items
Tahir is employed as a cabinet maker and he supplies his own tools for work. He buys 10 clamps to use in holding cabinets together.
Each clamp cost $40 and all came from the same manufacturer.
Each clamp is sold separately and comes in its own packaging. They have a total cost of $400.
Tahir's clamps are all identical as they are all from the same brand and have the same shape, composition and use. Tahir can't claim an immediate deduction.
Tahir must work out the decline in value of the items over the effective life to claim a deduction.
End of example