Re: Laptop tax deduction -- Cox Business Accountants

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Date Posted: Tuesday, May 18, 02:22:54pm
Author: Carly Evans
Subject: Re: Laptop tax deduction
In reply to: Susan 's message, "Laptop tax deduction" on Friday, May 14, 11:16:31am

Hi Susan,

That�s right. You can make considerable tax savings by salary packaging benefits that are exempt from Fringe Benefits Tax (FBT), such as a laptop computer.

Below I have included the details you need to keep in mind when looking to take advantage of salary packaging as well as an example of how it all works using the figures you provided in your question.

Salary Packing Exempt Benefits - Procedure to take advantage of depreciation claims

To make sure that you can claim depreciation as an employee for an exempt benefit (ie laptop), it is recommended that the benefit should be provided to the employee in the following way:

(a) The employee should initially purchase the asset out of their after-tax dollars;
(b) The employee must obtain a �valid� tax invoice for the item from the supplier;
(c) The employer should reimburse the employee for the GST-inclusive cost of the asset. Generally, the employer will be entitled to claim:

∙ an input tax credit for the GST included in the price of the asset; and
∙ an income tax deduction for the GST-exclusive amount of the
re-imbursement. Refer to Division 111 of the GST Act and S.27-5 of ITAA 1997.

(d) The employee must maintain diaries/records that demonstrate the extent to which the asset is used for work-related purposes.

(The above taken from NTAA Tax Schools Day 1 Booklet)

EXAMPLE

In this example, we will assume you are an employee earning annual salary of $80,000.

We will say that you purchased a laptop computer for $4,000 (including $363.36 GST) to be used 100% for work-related purposes. On the same day, your employer reimbursed you for the entire cost of the laptop through a salary sacrifice arrangement.

Your employer can claim an input tax credit of $363.36 and an income tax deduction of $3636.64 (GST-exclusive cost) for the reimbursement.

Salary Sacrifice Amount
Cost of reimbursement $4,000.00
Less: Input tax credit $ 363.63
Plus: FBT payable on benefit (exempt) Nil
Salary Sacrifice Amount $3636.37

Comparison of Packaged against Non-Packaged

PACKAGED USING PRE-TAX SALARY

Salary $80,000.00
Less: Salary sacrifice amount (as noted above) 3,636.37
Salary after sacrifice (ie net salary) $76,636.63
Less: tax and Medicare levy on taxable income 1*
Of $74,637 (see below) $23,578.94
Net Income after tax $53,057.69

NON-PACKAGED USING AFTER-TAX DOLLARS

Salary $80,000.00
Less: Tax and Medicare levy on taxable income 2*
Of $78,000 (see below) $25,210.00
Sub Total $54.790.00
Less: Cost of laptop $ 4,000.00
Net Income after tax and cost of laptop $50,790.00

So, the increase in your after tax income if you salary-package ($53,057.69 - $50,790.00) = $2,267.69

*Calculation of taxable income 1:
Salary $76,636.63 � $2,000 (depreciation claim below) = $74,636.63

*Calculation of taxable income 2:
Salary $80,000 - $2,000 (depreciation claim below) = $78,000.00

Depreciation Claim (for 2004 Financial Year)

$4,000 x 150% = $2,000
3 yrs effective life

I hope this information answers your question.

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