As Australians approach the end of the financial year on June 30, many are considering last-minute purchases with the hope of boosting their tax returns. However, tax agent Belinda Raso from Tax Invest Accounting reminds consumers to think carefully, as not all purchases will provide immediate tax deductions.
Raso explained to Yahoo Finance that according to Australian Taxation Office (ATO) regulations, assets acquired for over $300 cannot be fully claimed on the current year’s tax return. This rule pertains to depreciating assets such as furniture, equipment, laptops, mobile phones, and hand tools. Instead of receiving an immediate deduction, buyers must claim the cost over the asset’s effective life, which often spans at least two years.
“It’s a common misconception during this time of year, as many retailers promote tax-deductible items,” said Raso. “While items may indeed be tax-deductible, consumers won’t receive the full amount back this financial year if the asset costs over $300.”
To illustrate, if an individual purchases a computer for $3,000 with 100% work usage on June 15, they would only be able to claim $66 in deductions for that financial year. Conversely, if the computer is purchased on July 1, the individual can claim a full year’s depreciation in the following tax return, which amounts to approximately $750.
Research from Officeworks highlights that 40% of Australians intend to increase their spending on tax-deductible items compared to the previous year. Popular items on their shopping lists include laptops, technology, stationery, and office furniture. It is important to note that these items must be for work purposes to qualify for tax deductions.
Raso emphasised that while it is still feasible to make purchases now, consumers should be aware they won’t reap the full tax benefits in the current financial year. “If you have the cash flow and realise that you won’t be receiving the complete tax benefit for this year, go ahead and make your purchase,” she advised. However, Raso cautioned against the rush to buy high-ticket items just before June 30, particularly if they exceed the $300 threshold.
For assets purchased over the $300 limit, consumers should be aware of the timing, as assets can only be depreciated over their effective life. Raso reiterated, “There’s no urgency to purchase before June 30 unless the item is under $300.”
For more information regarding asset depreciation, the ATO provides a useful tool through the myGov portal or their website, listing the useful life of various assets. For example, laptops and iPads typically have a useful life of two years, while mobile phones also last for two years, and desktop computers and most hand tools can last up to four years.
As you claim depreciation on an asset over the years, it is vital to keep track of this information across tax returns. If you change accountants, ensuring that they have a copy of your previous tax returns is crucial to accurately continue the depreciation schedule. Failing to do so may result in missed opportunities to claim deductions, ultimately leaving potential money unclaimed.
In summary, individuals should approach their pre-financial year purchases with careful consideration. Understanding the ATO regulations and asset depreciation will better prepare them for their tax obligations and help them avoid pitfalls associated with misconceptions of instant tax benefits.
