Tax deduction for laptop?

As an accountant, I can hopefully put an end to the debate.

Depreciation of a laptop or desktop PC can be claimed as a general deduction if ANY taxpayer buys, holds and sells shares, proportionate to the time used for this activity compared to private use.

The ATO deems these items to have a 3 year effective life. You can use the straight line method or the diminishing value method to depreciate.

If you sell the laptop at the end of this 3 year period, you have to declare the receipts as ordinary assessable income, if you claim depreciation as a deductible expense throughout.

Krusty the Klown said:

The ATO deems these items to have a 3 year effective life. You can use the straight line method or the diminishing value method to depreciate.

Click to expand...

I still haven't had a change to call ATO yet.

Krusty could you give a brief calculation of the straight line method or diminishing value method?

airpoe said:

I still haven't had a change to call ATO yet.

Krusty could you give a brief calculation of the straight line method or diminishing value method?

Click to expand...

You don't have to ring the ATO. It's all available on the ATO web site.

http://www.ato.gov.au/individuals/content.asp?doc=/content/00191816.htm

See p 7 for examples

OK let's say we have an item worth $10K with an effective life of 20 years.

Using the prime cost or straight line method you simply divide 100 (%) by 20, you get an answer of 5. This means you can claim 5% of $10K or $500 p.a. as a deduction for 20 years.

With the diminishing value method, firstly you use double the purchase cost, in this case it will be $20K, then double the depreciation rate to 10%. In the first year depreciation expense will be $2,000.

In year 2 the written down value of the item is now $8K, so depreciation expense is 10% of $16K = $1,600. The item's written down value is now $6,400 at the end of year 2.

In year 3 the written down value of the item is now $6,400K, so depreciation expense is 10% of $12,800 = $1,280. The item's written down value is now $5,120 at the end of year 3

In the straight line method, the depreciation expense is the same each year of usable life of the asset, in the diminishing value method the expense starts out high and then gets progressively smaller each year.

Hope that makes sense.

thanks for all the help & feedback, now fully understand how to do my depreciation!!