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Edited version of private ruling
Authorisation Number: 1011673593473
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Ruling
Subject: Cost of managing tax affairs
Question
Are you entitled to a deduction for the expense incurred in purchasing computer software which will be used solely for completing your income tax returns?
Answer
Yes.
This ruling applies for the following period
Year ending 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts
You wish to lodge your income tax return using e-tax.
Your computer is set up with Linux, which provides all applications required for your normal computer use.
E-tax will not operate using this system.
You need to purchase a licensed copy of Microsoft Windows purely to do your tax return.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 25-5
Income Tax Assessment Act 1997 Section 40-25
Income Tax Assessment Act 1997 Subsection 40-80(2)
Reasons for decision
An expense for managing income tax affairs is deductible under section 25-5 of the Income Tax Assessment Act 1997 (ITAA 1997). This section also provides that property used for managing a taxpayer's tax affairs is considered to be property used for the purpose of producing assessable income.
Section 40-25 of the ITAA 1997 allows a deduction for the decline in value (formerly called depreciation) of a depreciating asset owned and used, or installed for use, in the production of assessable income.
The decline in value for the cost of a computer software package used to prepare and lodge your tax return would be deductible as it is considered to be property used for the purpose of producing assessable income.
In your case the software you will acquire will be used solely for the preparation of your income tax returns. Consequently you are entitled to claim a deduction for the decline in value of the software.
An immediate deduction is available under subsection 40-80(2) of the ITAA 1997 for certain depreciating assets costing $300 or less to the extent the asset is used for a taxable purpose during the respective income year.