Home – New Forums Money matters Sole Trader : Claiming Business Deductions: Computers

  • This topic is empty.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • #982883
    niktos
    Member
    • Total posts: 2
    Up
    0
    ::

    Hi,

    been browsing this for a while as well as ATO website to see what I could possible deduct from the assessable income. My area of trading is the IT (software development), and apparently computers and monitor are my shovel and pickaxe.

    After reading the following:
    “If you’re a small business entity and paid less than $6,500 for the asset, you can claim the full amount in the year you incurred the expense.” I though great, I’ll buy a new computer and that’s it.

    But apparently there is more to it than that:
    “[From Capital Assets part]These assets have a limited life expectancy (effective life) and can reasonably be expected to decline in value over the time you use them. They are called ‘depreciating assets’, and include: computers etc..etc.”

    Could please someone tell me, how is a computer (laptop) actually being deducted from the assessable income? (let’s say I have the cash to buy it, and I buy it right in the middle of the financial year, and it costs 2000$. What options (if any) do I have to claim this deductible expense.

    I think I’ve also read somewhere that is better to claim it as depreciating asset rather than claiming it outright in full. Can someone pls explain?

    Also, do monitors count as computers?

    Thank you so much in advance.

    Regards,
    Michal

    #1139427
    CindyK
    Member
    • Total posts: 155
    Up
    0
    ::

    HI Michal,

    I am not sure but I think you might be having issues with the difference between purchasing and depreciation.

    When you purchase anything business related (and you are carrying on a business) then you can claim that purchase in full (unless it was partly for private use) as a business purchase. For example, you earn $10000 in July and you bought a computer for $3000 in July. The whole $3000 is a business purchase. Your profit becomes $7000 (very simple illustration) for July. If you lodge BAS you include the total payments.

    When they are talking about claiming the full amount under $6500 they are referring to the depreciation on the asset. Depreciation is the reduction in dollar value of an asset over the time you have it.The ATO sets the % rate of asset depreciation for each main type of asset and how many years you depreciate it over. There are differences for computers, equipment, vehicles etc.

    Depreciation is calculated and claimed at the end of the year with your income tax. It reduces your taxable income.

    Where it says you can claim the whole depreciation up front for under $6500, then rather than being 20% over 5 years (just an example, not specific for your asset) it is 100% in one year. Your taxable income is reduced by that amount.

    Hopefully this gives you a general overview. Not sure if it helps, do you have an accountant that you can ring and ask. It’s your accountant/tax agent who will work out your depreciation.

    #1139428
    niktos
    Member
    • Total posts: 2
    Up
    0
    ::

    Hi Cindy,

    that’s exactly what I needed, explanation like that. I’m new to Australian business scheme thus I’m trying to get as much help as I can.
    I’ll definitely get an accountant to do my tax return for 2012-13 fy

    Thank you.

    Regards,

    Michal

    #1139429
    TimFairweather
    Member
    • Total posts: 25
    Up
    0
    ::
    CindyK, post: 159136 wrote:
    HI Michal,

    I am not sure but I think you might be having issues with the difference between purchasing and depreciation.

    When you purchase anything business related (and you are carrying on a business) then you can claim that purchase in full (unless it was partly for private use) as a business purchase. For example, you earn $10000 in July and you bought a computer for $3000 in July. The whole $3000 is a business purchase. Your profit becomes $7000 (very simple illustration) for July. If you lodge BAS you include the total payments.

    When they are talking about claiming the full amount under $6500 they are referring to the depreciation on the asset. Depreciation is the reduction in dollar value of an asset over the time you have it.The ATO sets the % rate of asset depreciation for each main type of asset and how many years you depreciate it over. There are differences for computers, equipment, vehicles etc.

    Depreciation is calculated and claimed at the end of the year with your income tax. It reduces your taxable income.

    Where it says you can claim the whole depreciation up front for under $6500, then rather than being 20% over 5 years (just an example, not specific for your asset) it is 100% in one year. Your taxable income is reduced by that amount.

    Hopefully this gives you a general overview. Not sure if it helps, do you have an accountant that you can ring and ask. It’s your accountant/tax agent who will work out your depreciation.

    Cindy great answer. :)

Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.