Edited version of private advice

Authorisation Number: 1051801377898

Date of advice: 09 February 2021

Ruling

Subject: Work related expense - smart watch

Question

Is depreciation on a smart watch an allowable deduction?

Answer

No

This ruling applies for the following period:

Year ending 30 June 2020

The scheme commences on:

1 July 2019

Relevant facts and circumstances

You are an education assistant employed at a primary school.

In a letter from your employer it includes that you use your smart watch to connect to the devices used in the classrooms and allows you to be 'hands-free' when working with individuals or small groups of children.

Relevant legislative provisions

Section 8-1 of the Income Tax Assessment Act 1997

Section 40-25 of the Income Tax Assessment Act 1997

Reasons for decision

In your case you are seeking a deduction for the decline in value (depreciation) of a smart watch you wear whilst carrying out your employment.

TR 2020/1 Income tax: employees: deductions for work expenses under section 8-1 of the Income Tax Assessment Act 1997 discusses when an employee can deduct losses or outgoings incurred in producing salary or wages.

Decline in value (depreciation) of an asset is also treated as a work expense in this ruling. Although deductible under section 40-25 of the ITAA 1997, a condition for the deduction is use of the depreciating asset 'for the purpose of producing assessable income'. Therefore section 8-1 principles are relevant in this case.

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature.

An expense that is private in nature does not become deductible only because of an employer's requirements. Common examples in TR 2020/1 regarding the relevance of employer requirements includes when an employee is required to possess a driver's licence or present themselves in a well-groomed manner. Standards set by employers would not change the essentially private character of expenses in obtaining a driver's licence or maintaining a particular level of appearance.

Section 'Part C commonly claimed expenses' of the 'Employees guide for work expenses' provides advice and an example on the use of 'smart watches' in the workplace. It is explained they are generally private expenses. Where an employer provides you the necessary tools to carry out your duties (such as a classroom having the relevant electronic devices), the ability to check phone and messages on a smart watch is not a part of employment duties.

Example - smart watch not deductible

Dianna is a police officer who primarily works on bicycle patrol. As part of her role, she needs to keep GPS records of where she travels. The department has provided her with a GPS for this purpose. Dianna purchases a smart watch so it is easier for her to keep personal GPS records and to check messages sent to her phone while she is on patrol. She receives both private and work-related messages via the smart watch. Dianna cannot claim a deduction for the smart watch, because her employer provides her with the necessary tools to fulfil her work functions. The ability to check messages on her phone with her watch is not a part of her employment duties and the cost of the watch is not a deductible expense for her work.

Therefore, it is considered you are not entitled to claim a deduction for the decline in value of the smart watch because it is a private expense.