Studying? Claim your computer on tax!
The end of the Financial Year means two things: sales and tax time. Did you know that you may be able to claim a number of study related expenses as tax deductions?
Whether you’re studying to become a trainer with the Certificate IV in Training and Assessment, a safety officer through the Certificate IV in Work Health and Safety or any other career path, you could be eligible to claim tax deductions for your study expenses.
Reducing the amount of tax you have to pay is just another benefit of pursuing courses. Studying nationally accredited qualifications now both enhances your career prospects and cuts your tax bill.
Are you eligible? What can you claim? Read on.
Self-Education Tax Deduction For Laptops & Desktop Computers
If you’re studying with us, you’re probably using a laptop or desktop computer as an essential study tool.
Is a computer tax deductible?
Yes, a computer is tax deductible!
If your course is an eligible work-related self-education expense, and you use your computer for study, then you can potentially claim a tax deduction for laptop or desktop computer expenses.
Eligible computer expenses for tax deduction
- Interest on money borrowed to finance the cost of your computer
- Cost of repairing your computer
- Decline in value (depreciation) of the cost of your computer
Are you eligible to claim?
If the course you study has ‘sufficient connection’ to your current employment or work, then you may qualify for a tax deduction for laptop or desktop computers used for study. If your course is unrelated to your current income-earning activities, or even too general, then you won’t be able to claim the self-education tax deductions for laptop or desktop computers.
You should be eligible for the computer tax deduction if you are working and studying at the same time, AND:
- • You are upgrading your qualifications for your current employment
- • You are improving specific skills or knowledge used in your current employment
- • You are employed as a trainee and you are undertaking a course that forms part of that traineeship
- • You can show that at the time you were working and studying, your course led, or was likely to lead, to an increase in employment income.
So, for example, you might have already earned your Certificate III in Business Administration. You’re working in an entry level bookkeeping position – doing payroll & accounts receivable and payable for a small business. You’re also currently studying to get your Certificate IV in Bookkeeping.
The Cert IV in Bookkeeping improves your skills and knowledge for your current employment AND will likely lead to an increase in your employment income. Therefore, you should be eligible to claim a tax deduction for laptop or desktop computers that help you complete your course.
Likewise, if you are working in childcare and studying your Certificate III in Early Childhood Education and Care – which you must have to keep working in childcare next year – you should be able to claim tax deductions for laptop or desktop computers used for study.
You can’t claim self-education expenses if:
- • Your study is not related to your employment.
- • You are employed in a field related to your studies but the skills you’re obtaining are not used or only partially used in your employment duties
- • The course is opening up a new field of employment
For example, you have a number of vocational qualifications in work health and safety and are currently employed in the work health and safety field. You’ve decided to add a vocational trainer qualification to your skillset so you can work as a trainer in a private RTO or TAFE. You mostly likely won’t be able to claim deductible self-education expenses because your training doesn’t relate to your current employment, it is opening up a new field of employment.
In another case, you might be working in childcare and decide to do a disability care course so you have more skills to help children with special needs at your childcare centre. The course will be used in your employment duties, but will only make up part of your job. In that situation, you’re best off consulting with a tax specialist who can look at your specific circumstances and determine whether you can claim the self-education deductions or not.
How much can you claim?
This is very important!
If you use your computer for other purposes as well – say watching movies and surfing the internet – then you need to split your claim between private use and self-education use.
So, for example, you might spend 15 hours a week studying on your computer, and another 5 hours watching movies and chatting on Facebook.
When you split your claim:
• 75% of the computer use is for self-education related purposes
• 25% of the computer use is for private purposes
The computer was only used for study 75% of the time, therefore you can only claim 75% of the total expenses relating to the computer as tax deductions. This includes all tax deductible computer expenses – repairs, depreciation and interest paid on a loan for the computer.
How to calculate depreciation
There are two common ways to calculate depreciation. These are ‘prime cost’ and ‘diminishing value’. If you’re studying accounting or bookkeeping, you’re probably familiar with these methods.
If you don’t know what these mean, we’ll break it down for you:
With the prime cost method, your computer will be depreciated in a ‘straight line’ method. This means the depreciation you claim for your desktop or laptop tax deduction will be the same every year, for the effective life of the computer.
More information on ‘prime cost’ can be found on the ATO website here
With the diminishing value method, your computer will be depreciated a large amount in the first year, and then a smaller amount each year, for several years.
More information about ‘diminishing value’ can be found on the ATO website here
Using the ATO ‘Decline in value’ (depreciation) calculator, we can show you can example of calculating your desktop or laptop tax deduction.
Say you bought a new computer a couple of years ago.
• The purchase date was the first day of the new financial year for 2011-2012 (1st July 2011).
• The computer cost $2499.
• You expect it to last for 3 years, so the laptop has a 3 year ‘effective’ life.
• You use the laptop for an eligible self-education purpose 75% of the time, and 25% of use is personal.
Plug that into the ATO decline in value calculator and we get:
Using the Prime Cost method, you can claim about $625 each year, for 3 years.
Using the diminishing value method, you would have claimed $1252 in 2011-12, then $414 in 2012-13, and $138 in 2013-14. You’ll still be deducting a tiny amount until the 2017-18 financial year.
You can find the ‘Decline in value (depreciation)’ calculator here
Which depreciation method should you use?
That’s a very tricky question and depends on your circumstances. Both methods give the same total deduction in the end.
Diminishing value is probably the most ‘real’ method. If you try to sell your computer after you’ve owned it one year, you’ll find the value has gone down a lot. If you hold onto it for longer, the value keeps going down, but not as quickly.
A tax agent will probably tell you to use the diminishing value method because it will normally give you a larger tax return in earlier years.
Knowing which method will give you the maximum overall tax advantage depends on your personal tax position and marginal tax rate. It would take hours to go through all the possibilities. Given that most people buy relatively cheap laptops, there would be very little – or no – difference between the methods.
Claim your self-education expense deductions
Claiming your self-education tax deduction for laptop or desktop computers is a nice way to help you with the costs of studying. It’s worth taking some time to explore all the expenses you can claim – you might be surprised at how much money you can get back!
There are a range of other self-education tax deductions you can claim on your tax return as well:
- • Tuition fees, including fees payable under FEE-HELP (this does not include expenses paid under HECS-HELP)
- ○ FEE-HELP is a loan for eligible fee-paying students enrolled at an eligible higher education provider or Open Universities of Australia
- • Self-education expenses paid with your OS-HELP loan
- ○ OS-HELP is a loan which helps students meet airfares, accommodation and other travel expenses while undertaking some of their study overseas
- • Textbooks, professional and trade journals
- • Stationery
- • Photocopying
- • Computer expenses
- • Student union fees
- • Student services and amenities fees
- • Accommodation and meals, only when participating in your course requires you be away from home for one or more nights tuition fees, including fees payable under FEE-HELP (this does not include expenses paid under HECS-HELP)
- • Running expenses if you have a room set aside for self-education purposes – such as the cost of heating, cooling and lighting that room while you are studying in it
- • Allowable travel expenses
For more information check out the ‘Claiming self-education expenses – specific examples’ page.
Please consult with your tax agent or accountant before claiming any self-education related expenses on tax, to ensure you are completely eligible for any deduction!
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