Claiming mobile phone, internet and home phone expenses

Do you use a mobile phone, the internet or home phone for work purposes?

Clearly, any personal usage of these devises is private in nature and non-deductible for Tax purposes, however, if you use any of these devices for work purposes you may be able to claim a percentage as a tax deduction provided you can substantiate the percentage of business/work use and your employer has not reimbursed you the cost i.e. you have directly incurred the cost.

But wait …  it is a bit more complex than this  …  The Australian Taxation Office (ATO) provides  guidance in relation to the different types of scenarios.

If the business/work costs are incidental then provided you are not claiming more than $50 as a deduction you can claim the following:-

  • $0.25 for work calls made from your landline,
  • $0.75 for work calls made from your mobile, and
  • $0.10 for text messages sent from your mobile.

If you receive a bill which itemises your account then you need to determine the percentage of work use over a 4 week period that can be applied for the full year.  The main thing being the percentage is reasonable.

Here’s an example the ATO publishes to explain:

Example – phone calls are itemised on your bill

Julie has an $80 per month mobile phone plan, which includes $500 worth of calls and 1.5GB of data. She receives a bill which itemises all of her phone calls and provides her with her monthly data use.

Over a 4-week representative period Julie identifies that 20% of her calls are work-related. She worked for 11 months during the income year, having had 1 month of leave. Julie can claim a deduction of $176 in her tax return (20% x $80 x 11 months).

Ok, so what if I receive a bill which doesn’t itemise the account?  Here you need to keep a log of all the calls you make over a 4 week period that is representative of the year.

The ATO provides the following example to explain:

Example – non-itemised account

Ahmed has a prepaid mobile phone plan which costs him $50 per month. Ahmed does not receive a monthly bill so he keeps a record of his calls for a 4-week representative period. During this 4-week period Ahmed makes 25 work calls and 75 private calls. Ahmed worked for 11 months during the income year, having had 1 month of leave.

Ahmed calculates his work use as 25% (25 work calls /100 total calls). He claims a deduction of $138 in his tax return (25% x $50 x 11 months).

The situation that is becoming more and more common is the bundled phone and internet plans, ie. phone, internet and mobile phone are bundled together with no clear cost of each service.

.  In this case you are required to apportion each of the services provided. 

The ATO explains this with two (2) examples:

Example 1 – apportioning bundled services

Sujita has a $100 per month home phone and internet bundle. The bill identifies that the monthly cost of Sujita’s phone service in her bundle is $40, and her internet service is $60. Sujita brings in her mobile phone plan of $90 per month and receives a $10 per month discount. Her total costs for all services are $180 per month.

Sujita worked for 11 months during the income year, having had 1 month of leave.

Based on her itemised accounts, Sujita determines that the work related use of her mobile phone is 20%. Sujita also uses her home internet for work purposes and based on her use she determines that 10% of her use is for work. Sujita does not use her home phone for work calls.

As the components are part of a bundle Sujita can calculate her work related use as follows:

Step 1 – work out the value of each bundled component

Mobile phone

$90 per month minus the $10 per month discount = $80 per month

Internet

$60 per month as identified on her bill

Home phone

Sujita does not need to determine the home phone costs as she does not use this service for work purposes.

Step 2 – apportion your work related use

Home internet use

10% work related use x $60 per month = $6 work related use per month x 11 months

Sujita can claim $66

Mobile phone use

20% work related use x $80 = $16 per month x 11 months

Sujita can claim $176

In her tax return Sujita claims a deduction of $242 for the financial year ($66 home internet use + $176 mobile phone use)

Sujita cannot claim work related use of her home phone as she did not use it for work.

End of example

Example 2 – apportioning bundled services

Des has a $90 per month home phone and internet bundle, and unlimited internet use as part of his plan. There is no clear breakdown for the cost of each service. By keeping a record of the calls Des makes over a 4 week representative period, he determines that 25% of his calls are for work purposes. Des also keeps a record for 4 weeks of the data downloaded and determines that 30% of the total amount used was for work.

Des worked for 11 months during the income year, having had 1 month of leave.

As there is no clear breakdown of the cost of each service, it is reasonable for Des to allocate 50% of the total cost to each service.

Step 1 – work out the value of each bundled component

Internet

$45 per month ($90/2 services)

Home phone

$45 per month ($90/2 services)

Step 2 – apportion your work related use

Home phone

25% work related use x $45 per month x 11 months = $124

Internet

30% work related use x $45 per month x 11 months = $149

In his tax return Des claims a deduction of $273 ($124 + $149) for the year.

Yes, this can be complex however, hopefully this article gives you some guidance. If you have any doubts or concerns, contact me at Balanix Solutions (07 3264 4783) for specific advice about your individual circumstances.

David Balwin FCPA Registered Tax Agent
Don’t have an Accountant – call me today to help 07 32644783