The ATO has released information on claiming mobile phone, internet and home phone expenses to reflect the significant rewrite of Practice Statement PS LA 2001/6 to include contemporary electronic device issues. The rewrite also updates the ATO’s approach to the apportionment of mobile phone, home phone and internet expenses.

If a taxpayer uses their own phone(s) or internet for work purposes, they may be able to claim a deduction if they paid for these costs and have records to support their claims. If a taxpayer uses their phone(s) or internet for both work and private use, they will need to work out the percentage that reasonably relates to their work use.

SUBSTANTIATING CLAIMS

Taxpayers need to keep records for a four-week representative period in each income year to claim a deduction of more than $50. These records may include diary entries, including electronic records, and bills. Evidence that a taxpayer’s employer expects them to work at home or make some work-related calls will also help the taxpayer demonstrate that they are entitled to a deduction.

WHEN A TAXPAYER CAN’T CLAIM A DEDUCTION FOR THEIR PHONE

Employer provided phone

If a taxpayer’s employer provides them with a phone for work use and is billed for the usage (phone calls, text messages, data) then the taxpayer is not able to claim a deduction. Similarly, if a taxpayer pays for their own usage and is subsequently reimbursed by their employer, they are not able to claim a deduction.

HOW TO APPORTION WORK USE OF A TAXPAYER’S PHONE

As there are many different types of plans available, taxpayers will need to determine their work use using a reasonable basis.

Incidental use

If a taxpayer’s work use is incidental and they are not claiming a deduction of more than $50 in total, they may make a claim based on the following without having to analyse their bills:

• $0.25 for work calls made from taxpayer’s landline
• $0.75 for work calls made from taxpayer’s mobile, and
• $0.10 for text messages sent from taxpayer’s mobile.

Usage is itemised on taxpayer’s bills

If the taxpayer has a phone plan where they receive an itemised bill, they need to determine their percentage of work use over a four-week representative period which can then be applied to the full year.

The taxpayer will need to work out the percentage using a reasonable basis. This could include:

• the number of work calls made as a percentage of total calls
• the amount of time spent on work calls as a percentage of the taxpayer’s total calls
• the amount of data downloaded for work purposes as a percentage of the taxpayer’s total downloads.

Example: phone calls are itemised on taxpayer’s bill
Julie has an $80 per month mobile phone plan which includes $500 worth of calls and 1.5GB of data. She receives a bill which itemises all of her phone calls and provides her with her monthly data use.

Over a four-week representative period, Julie identifies that 20% of her calls are work-related. She worked for 11 months during the income year, having had one month of leave. Julie can claim a deduction of $176 in her tax return (20% × $80 × 11 months).

Usage is not itemised on taxpayer’s bills

If the taxpayer has a phone plan where they don’t receive an itemised bill, they determine their work use by keeping a record of all their calls over a four-week representative period and then calculate their claim using a reasonable basis.

Example: non-itemised account

Ahmed has a prepaid mobile phone plan which costs him $50 per month. Ahmed does not receive a monthly bill so he keeps a record of his calls for a four-week representative period. During this four-week period Ahmed makes 25 work calls and 75 private calls. Ahmed worked for 11 months during the income year, having had one month of leave.

Ahmed calculates his work use as 25% (25 work calls /100 total calls). He claims a deduction of $138 in his tax return (25% × $50 × 11 months).

BUNDLED PHONE AND INTERNET PLANS

Phone and internet services are often bundled. When a taxpayer is claiming deductions for work-related use of one or more services, they need to apportion their costs based on their work use for each service.

If other members in the taxpayer’s household also use the services, the taxpayer needs to take into account their use in your calculation.

If the taxpayer has a bundled plan, they need to identify their work use for each service over a four-week representative period during the income year. This will allow the taxpayer to determine their pattern of work use which can then be applied to the full year.

A reasonable basis to work out the taxpayer’s work-related use could include:

Internet
• the amount of data downloaded for work as a percentage of the total data downloaded by all members of the taxpayer’s household, and
• any additional costs incurred as a result of the taxpayer’s work-related use — for example, if their work-related use results in them exceeding their monthly cap.

Phone
• the number of work calls made as a percentage of total calls
• the amount of time spent on work calls as a percentage of the taxpayer’s total calls, and
• any additional costs incurred as a result of the taxpayer’s work-related calls — for example, if the taxpayer’s work-related use results in them exceeding their monthly cap.

Example 1: apportioning bundled services

Sujita has a $100 per month home phone and internet bundle. The bill identifies that the monthly cost of Sujita’s phone service in her bundle is $40, and her internet service is $60. Sujita brings in her mobile phone plan of $90 per month and receives a $10 per month discount. Her total costs for all services are $180 per month.

Sujita worked for 11 months during the income year, having had one month of leave.

Based on her itemised accounts, Sujita determines that the work-related use of her mobile phone is 20%. Sujita also uses her home internet for work purposes and based on her use, she determines that 10% of her use is for work. Sujita does not use her home phone for work calls.

As the components are part of a bundle Sujita can calculate her work-related use as follows:

Step 1 — work out the value of each bundled component

Mobile phone

$90 per month minus the $10 per month discount = $80 per month

Internet

$60 per month as identified on her bill

Home phone

Sujita does not need to determine the home phone costs as she does not use this service for work purposes.

Step 2 — apportion your work-related use

Home internet use

10% work-related use × $60 per month

= $6 work-related use per month × 11 months

Sujita can claim $66

Mobile phone use

20% work-related use × $80

= $16 per month × 11 months

Sujita can claim $176

In her tax return Sujita claims a deduction of $242 for the financial year ($66 home internet use + $176 mobile phone use)

Sujita cannot claim work-related use of her home phone as she did not use it for work.

Example 2: apportioning bundled services

Des has a $90 per month home phone and internet bundle, and unlimited internet use as part of his plan. There is no clear breakdown for the cost of each service. By keeping a record of the calls, Des makes over a four-week representative period, he determines that 25% of his calls are for work purposes. Des also keeps a record for four- weeks of the data downloaded and determines that 30% of the total amount used was for work.

Des worked for 11 months during the income year, having had one month of leave. As there is no clear breakdown of the cost of each service, it is reasonable for Des to allocate 50% of the total cost to each service.

Step 1 — work out the value of each bundled component

Internet

$45 per month ($90/2 services)

Home phone $45 per month ($90/2 services)

Step 2 – apportion work-related use

Home phone

25% work-related use × $45 per month × 11 months = $124

Internet 30% work-related use × $45 per month × 11 months = $149

In his tax return Des claims a deduction of $273 ($124 + $149) for the year.

If a taxpayer purchased a smart phone, tablet or other electronic device and uses it for work, they can claim a deduction for a percentage of its cost.

Source: ATO website, 14 August 2015.