Do you use your mobile phone for work?
Recent research revealed that there are over 30 million mobile phones in use in Australia. That’s more mobile phones than there are people! The explosion in mobile phone usage over the past few years has led to a widespread expectation that employees will be contactable at almost any hour of the day, any day of the week.
So, if you are one of the millions using your mobile phone to make or receive work calls, are you claiming a tax deduction for the costs which you are incurring? If the answer to that is no, you should be. With smartphone bills these days averaging over $700 annually, you could be missing out on hundreds of extra dollars in refunded tax when you complete your return.
So, what are the common reasons for people not to claim a deduction? First of all, there’s a simple lack of awareness that you can even claim in the first place. Secondly – and more commonly – there’s a failure to keep the right records. As with all tax deductions, being able to support your deduction claim with records is vital.
The basic rules
If you use your own phone for work purposes, you can claim a deduction if you paid for these costs and have records to support your claims.
If you use your phone for both work and private use, you will need to work out the percentage that reasonably relates to your work use.
You can’t double-dip and claim for phone expenses that have been reimbursed by your employer.
How do I substantiate my claim?
The good news is you don’t need to go through every phone bill for the whole year, highlighting your work calls!
Instead, you need to choose a typical four-week period from some point in the tax year.
If you have a phone plan where you receive an itemised bill, you need to determine your percentage of work use over that 4-week period. You can then apply that to the full year.
You need to calculate the percentage using a reasonable basis. 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
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 1 month of leave. Roger can claim a deduction of $550 in his tax return (50% x $100 x 11 months).
If you have a phone plan where you don’t receive an itemised bill, you determine your work use by keeping a record of all your calls over a 4-week representative period and then calculate your claim using a reasonable basis (for example, number of work calls as a proportion of total calls).
If you incur extra charges in a particular month, for example because you have exhausted your data allocation and had to pay for more, you can also claim the work related element of those extra costs.
Finally, if you purchased your handset outright, you can also claim a deduction for a percentage of the handset cost based on your work-related usage. If the handset costs less than $300, you can claim an immediate deduction. If the handset costs 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 personal mobile phone for work and the total deduction you are 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
H&R Block can help
We can identify exactly what you need to do to get into shape for the tax season and maximise your refund.
- Find your nearest H&R Block office and book an appointment
- Lodge your tax return online with H&R Block
- Download our tax app to help you track your tax deductible expenses and trips
This information is intended as a guide for H&R Block clients. Personal details and circumstances differ, please discuss your situation with a H&R Block tax consultant.