Edited version of private advice

Authorisation Number: 1051742325396

Date of advice: 27 August 2020

Ruling

Subject: Deductions

Question 1

Can you claim a deduction for the cameras, lenses and accessories that cost less than $300?

Answer

Yes.

Question 2

Can you claim a portion of the decline in value of the cameras, lenses and accessories that cost more than $300?

Answer

Yes.

This ruling applies for the following periods:

Income year ended 30 June 2019

Income year ended 30 June 2020

The scheme commences on:

1 July 2018

Relevant facts and circumstances

You have been employed for several years as a landscaper.

As part of your role you are required to take high quality photos of your landscape work. These are posted on your employer's business website and social media as well as being sent to your clients.

You need to purchase high quality cameras, lenses and accessories and update the equipment on an annual basis to maintain its relevance.

You spend $X per year for cameras, lenses and accessories.

You have evidence to support your claims.

Your employer does not provide you with any of the photographic equipment.

You are responsible for the storing and caring for the equipment.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Division 40

Income Tax Assessment Act 1997 Division 900

Reasons for decision

Deductions

Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for all outgoings to the extent to which they are incurred in gaining or producing assessable income. However, a deduction is not allowable for outgoings that are of a capital, private or domestic nature.

In your case, you are required by your employer to take photographs your landscaping jobs for which you purchase cameras, lenses and accessories.

As the expenses are incurred in the course of gaining or producing your assessable income, a deduction is allowable for the expenses you incur for cameras, lenses and accessories.

An outright deduction cannot be claimed for any items that cost more than $300. Also, you cannot claim a deduction if you are reimbursed by your employer for the expenses.

Items that cost more than $300

For depreciating assets that cost $300 or more the decline in value of the asset is claimed over time under Division 40 of the ITAA 1997. Division 40 allows a deduction for the cost of a depreciating asset by spreading the deduction over the effective life of the asset, and subdivision 40-B provides the rules for making this deduction.

Section 40-25 of the ITAA 1997 allows a taxpayer to deduct an amount equal to the decline in value of a depreciating asset which is held for any time during an income year and used for a taxable purpose. A taxable purpose includes the purpose of producing assessable income (subsection 40-25(7) of the ITAA 1997).

The Commissioner's effective life which applies from 1 July 2020 is found in Taxation Ruling TR 2020/3 Effective life of depreciating assets (TR 2020/3), on page 215 under 'Information media and telecommunications'. The effective life:

• for a digital camera is 5 years
• for a tripod is 10 years, and
• for a lens is 10 years.

For camera and lens accessories the effective life varies from 3 to 12 years. You can also find these on page 215 of TR 2020/3.

There are examples on the above-mentioned pages in our website of how to calculate the decline in value. You need to choose whether you will use the prime cost (claim the same amount each year) or diminishing value method (a greater amount in the earlier years of the deduction). You also need to work out the number of days in the year that you held the asset, and the number of days that it was used for a taxable purpose. You can make this claim each year, over the effective life of the asset, that it is used for work purposes.

When you are no longer using these assets in gaining your assessable income, you cannot claim a deduction, unless you use them again for income producing purposes.