Recent research shows 9 out of 10 Australians own a smartphone. In 2017, the ABS reported that more than half of businesses regard mobile internet as important “to a major extent” for their activities.
As such, it’s becoming more difficult for employees to draw the line between work and play.
Our ‘always on’ culture sets the expectation that employees are contactable at almost any hour of the day, any day of the week. In addition, with millions of Australians currently working full time from home, their mobile phone has become for many the primary means of staying in touch with their boss, their colleagues and their customers.
If you’re one of the millions of Australians who use their personal mobile phone for work purposes, you may be entitled to claim a tax deduction on the costs incurred.
With the average annual smartphone bill hovering around $700, you could be missing out on hundreds of extra dollars in refunded tax when you complete your return.
To avoid short-changing yourself or accidentally over-claiming, here’s what you need to know about claiming your phone usage:
First things first: The basics
If you use your personal mobile phone for work purposes, you’re entitled to claim a deduction for the costs you incurred provided you weren’t reimbursed by your employer and you have records to support your claims.
If you use your phone for both personal and work purposes, you can still claim a deduction but only for the percentage which relates to work use.
The Australian Taxation Office (ATO) is cracking down on higher claims so keep records and only claim what you’re legitimately entitled to.
While you need to keep records to substantiate your claim, you don’t need to save every single phone record. So before you start highlighting your work calls, here’s how you can substantiate your claim.
If you’re claiming a deduction for more than $50, you’ll need to keep a record over a four-week period at some point in the tax year. If you receive an itemised phone bill, you need to determine your percentage of work use over that 4-week period and then apply this to the entire year.
If you don’t receive an itemised bill, you can determine the percentage of your work use by keeping a record of all your calls over a 4-week representative period.
Then, you can calculate your claim using a reasonable basis (for example, number of work calls as a proportion of total calls). 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 your total calls
• The amount of data downloaded for work purposes as a percentage of your total downloads
Other records may include diary entries, including electronic records and bills. Producing evidence that your employer expects you to work at home or make some work-related calls will also help you demonstrate you’re entitled to a deduction.
Example: Roger has a $100 per month phone plan. He receives a bill which itemises all of his phone calls.
Over a 4-week representative period, Roger identifies that 50% of his calls are work-related. He worked for 11 months during the income year, having had one month of leave. Based on these calculations, Roger can claim a deduction of $550 in his tax return (50% x $100 x 11 months).
If you incur extra charges in a particular month because you’ve exhausted your data allocation and had to pay for more, you can also claim the work-related portion of those extra costs.
If you purchased a smartphone, tablet or other electronic device outright, you can also claim a deduction for a percentage of the cost based on your work-related usage. If the item costs less than $300, you can claim an immediate deduction.
For devices costing more than $300, you can claim a deduction over several years for the decline in value.
Example: Joe purchases a mobile handset for $250. He uses the phone 50% for work usage. He can claim a deduction for $125 in this year’s tax return.
Occasional work-related use
If you occasionally use your mobile phone for work purposes, and the total deduction you’re claiming for the year is less than $50 – you can claim the following flat rate amounts:
• $0.25 for each work call made from your home phone
• $0.75 for each work call made from your mobile
• $0.10 for text messages sent from your mobile
Bundled phone and internet plans
These days, it’s common for phone companies to bundle phone and internet plans. If you have a mobile, home and internet bundle, you’ll need to apportion your costs based on your work use for each service.
If other members of your household use the internet, you’ll need to factor their usage into your calculation.
Can I claim for my mobile and claim 80c/hr for working from home?
The ATO introduced a special ‘short cut’ rate from 1 March 2020 to simplify working from home claims. If you choose to apply it, you simply claim 80 cents per hour for every hour you work from home.
However, this rate includes ALL your potential working from home claims, including the use of your mobile phone so if you use the 80 cent rate, you can’t separately claim for your phone use.
Many people will find they get a better deduction if they don’t use the ‘short cut’ rate and instead claim each working from home expense separately, including their mobile phone. Your tax agent will be able to help you get the best claim.
When you can’t claim for your phone
If you’re provided with a work phone by your employer and your work is billed for the usage (phone calls, text messages, data), you’re not entitled to claim a deduction. The same goes if your employer reimburses you for the costs of your own phone.