Edited version of private advice

Authorisation Number: 1051843835919

Date of advice: 16 July 2021

Ruling

Subject: Deductions - work-related expenses - other work-related expenses

Question

Is the purchase of specialised equipment for use as an employee allowed as a deduction?

Answer

Yes

As part of your employment, you are required to use specialty equipment.

The equipment your employer has supplied does not meet your requirements for you to work effectively, you have discussed this with your employer and as a result of this, you wish to purchase new equipment that meets your needs.

As agreed by your employer, you will personally purchase the new required equipment, and your employer has agreed to pay for all running cost for the equipment.

For any equipment that you purchase, you must provide sufficient substantiation for your claims, further to this any item that costs $300 or more, the decline in value of the asset is to be claimed over time under Division 40 of the Income Tax Assessment Act 1997 (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).

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.

As the equipment you require is directly related to producing assessable income and will not be reimbursed for purchasing the new equipment by your employer, a deduction is allowed under Section 8-1 of the ITAA 1997.

This ruling applies for the following period:

Year ending 30 June 2021

The scheme commences on:

1 July 2020

Relevant facts and circumstances

You are an employee

To preform your duties as you are required to use a wide range of specialised equipment to complete your work, to a satisfactory level

The equipment that your employer has supplied is old and outdated, and does not suit your needs to perform your duties to a satisfactory level

You have discussed purchasing new equipment with your employer, however your employer will not purchase the new equipment

After further discussions with your employer, you have agreed to purchase new equipment yourself with no reimbursement

As part of this agreement, your employer has agreed to pay for all running cost of the new equipment you purchase

You are aware that any equipment $300 or over is required to be depreciated over the effective life (as listed by the ATO)

If you are to leave your current employer, you will take the equipment with you to your new role

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 Division 40