Laptop tax deductible as sole trader earning <$3000

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  geek001 on 10/11/2016 - 14:07

  AFAIK, you cannot claim GST back through your ABN if you are not registered for GST.

  • 

    SkMed on 10/11/2016 - 14:16

    Yeah that makes sense to me! I only ask because I remember my tax agent saying something about being able to claim a laptop if I bought one etc. But they might have meant just for myself or something… I dunno, I was tired. haha.

    • 

      geek001 on 10/11/2016 - 14:23

      You may need to talk to your tax agent to see if it is more worthwhile for you to claim it back as a deduction against your income, the amount you get back from the deduction is dependent on your tax bracket. Or you can let the freelance company buy it for you to save GST. Their company name will be on the invoice so you will not be able to legally double dip. :)

      My gut feeling would be that it is probably more worthwhile claiming it back through tax deduction, which should be more than 10% unless you are a low income earner. This also depends on how your "business" is structured. What I have said has lots of depends, so best to speak to your tax agent.

      • 

        SkMed on 10/11/2016 - 14:29

        Thanks for the info.

        I tried calling my tax accountant all day today but no answer :( and the guys I freelance for need an answer ASAP as they are buying new machines themselves so want to do it all at the same time. haha.

        My business "Structure" is having an ABN which isnt registered for GST, earning no more than a few thousand a year and invoicing after a freelance job is finished. Money goes into my personal bank account. and that it. haha.

        …. So I can claim more than the 10percent somehow!? this is interesting… haha.

      • 

        sabracad on 11/11/2016 - 19:31

        There is NO way to legally double dip.

        Your gut feel is incorrect regarding GST. If you're entitled to claim the GST, you're receiving 100% of that amount back plus the balance as a tax deduction, the tax deduction component only entitles you to receive your marginal rate back.

        Eg if entitled and have a 30% marginal rate of tax and purchase an item for $3300 inc GST you get back $300 GST plus 30% of $3,000 (this may be over multiple years depending upon the nature of the business operations). So $1,200 in total.

        If you're not entitled to GST you would only get 30% of $3,300 so $990 (again this may be over multiple years depending upon the nature of the business operations).

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  plmko on 10/11/2016 - 14:15

  +1

  Ignoring everything else, you aren't claiming $300, you are claiming $272.73.

  • 

    SkMed on 10/11/2016 - 14:17

    oh, okey dokey!

    Im not even going to ask how 10 percent GST of 3000 equals $272.73, I will just take your word for it :)

    • 

      battler on 10/11/2016 - 14:23

      2727.27 + 10% GST = 3000
      or divide 3000 by 11

      • 

        SkMed on 10/11/2016 - 14:29

        Ah I see. Fair enough. Thanks!

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  tomsco on 10/11/2016 - 14:37

  Someone correct me if I'm wrong, but let's assume you are on $87k on your full time job.

  The tax payable on your full time job would be $19,822.

  If you add $3,000 from your ABN it would be an additional $1,110 that you would have to pay.

  By deducting a $3,000 laptop, you have $0 profit from your ABN, therefore your taxable income remains $87k, not $90k. Therefore you pay $19,822, not $20,932 - so you are essentially $1110 better off.

  • 

    geek001 on 10/11/2016 - 14:43

    +1

    Sounds about right to me. $1110 is better than $273. Of course being on OzB, the $3k price would be excuding Amex credits and manufacturer cashbacks. wink wink. :)

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      tomsco on 10/11/2016 - 14:47

      Haha, too true.

      I'm still trying to understand the arrangement with the freelance company. So they buy the laptop and claim a GST credit, but how is ownership transferred to the OP? If they sell it straight to him, then they'd have to tack GST onto the price.

      • 

        SkMed on 10/11/2016 - 15:08

        Nah I think they would just buy it, get me to pay all except the GST straight to them and give me the laptop. Technically the ownership might stay with them, but thats cool with me as I trust them as I have worked with them full time for 5 years prior, travelled for 2 and now freelance occasionally for them over the past 2 years under my ABN.

      • 

        tomsco on 10/11/2016 - 16:09

        @SkMed: I just wouldn't do it that way. It's convoluted and you are worse off. Just buy it and claim it as a deduction on your income tax.

      • 

        SkMed on 10/11/2016 - 16:24

        @tomsco: Sorry, just to clarify, you mean claim it on my normal tax deductions as an individual? The same way I claim a percentage of my phone (30 percent used for work), percentage of home internet (as I work from home 1-2 days a week) USB drives etc each year? I could probably claim 90 percent for work purposes and 10 percent for personal use on the laptop. so that means I would only be claiming 9percent back right?

      • 

        tomsco on 10/11/2016 - 16:29

        @SkMed: Ignore the GST calculations. That is only under the arrangement where the company benefits. You gotta look out for your self.

        So say only 90% for work use, claim it under your ABN. You would be reducing your ABN's taxable income by $2700. Using the same rates as above, that's $999 less tax you would be paying. This is as you are able to claim 90% of the cost (work use).

      • 

        Slippery Fish on 11/11/2016 - 08:19

        @SkMed: then they claim free depreciation on your laptop for 5 years ect. Good deal if you use the method that takes the largest amount year one then less each year after.

        They aren't only helping you, they will claim it's value in depreciation. Talk to your accountant.

      • 

        foxmulder on 11/11/2016 - 08:24

        @Slippery Fish: This doesn't work if the company ask payment for the laptop. The company need to have a sales to the individual and GST is inclusive.

        The only way to do for the depreciation route if the company bought the item for the employee and just give it for free but it will involve fringe benefit tax.

      • 

        Slippery Fish on 11/11/2016 - 08:28

        @foxmulder: come on get in the real world here, they offered to buy and under the table give it to him for 2700. It's better for him then losing 3000 if he can't claim, but you can bet your arse that laptop will go on depreciation.

  • 

    SkMed on 10/11/2016 - 14:51

    So my full time job i'm employed as an individual contractor using my tax file number. Im not on a salary but get paid just for the days I work. No benefits, holiday, sick pay etc.

    I had the option to be employed full time with benefits etc like normal but chose to stay on like this as it allows me more flexibility to travel and take time off or just not work when there is no work etc. and im technically earning more this way (the sallary they offered was lower than what I could potentially earn working the full year).

    Anyway not sure if that makes a difference or not, but last financial year I paid about 16k in tax, and this year probably will pay about the same.

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  Drifta on 10/11/2016 - 20:25

  +1

  correct me if i am wrong but your income works this way:

  normal job salary + sole trader freelance ABN job income = total income

  tax paid = tax paid on total income based on what tax bracket you fall into.

  if you buy the laptop yourself your freelance job income is reduced by laptop value or 90% of laptop value if you use it 10% for personal.

  Therefore your total income is going to be basically mostly from salary job and a small amount from freelance job as you have reduced your freelance job income by laptop purchase.

  so it is better to buy the laptop yourself as you will reduce your taxable income by a few grand and consequently save the money equivalent to your tax bracket. so if you were in the 30% tax bracket..you are effectively getting a 30% discount on your laptop.

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  foxmulder on 10/11/2016 - 21:13

  Personally as you are not gst registered you don't collect gst in your sales this you can't claim gst on purchases.

  If your company wants to provide the laptop for your personal use (even it meant business for your sole trader point of view) it will be under fringe benefit thus your company need to pay fringe benefit tax to govt.

  If you purchase the item yourself you can claim the full amount of $3000 as tax deduction against your sole trader income - thus may be much better off for you. This assume the purchase of the laptop is eligible deduction as we may need to make sure your sole trader is really falls under small business classification.

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  alxr0101 on 11/11/2016 - 08:02

  If you were paid in Eneloops then you would not have this dilemna.

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  scorpiovegas on 11/11/2016 - 11:08

  I think you can buy from the freelance company and still claim it against your personal income. You are just paying $2700 instead of $3000. You simply bought it from your freelance company instead of a computer retailer. Maybe I'm missing something.

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    tomsco on 11/11/2016 - 15:19

    If the company sells it to him, they have to charge GST, so I have no idea where this idea of $2700 comes from. Unless as Slippery Fish says above, they don't record the sale.

    Regardless, he's better off buying it himself.

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  jhmtaylor on 11/11/2016 - 11:20

  I think you are over thinking this.
  First of all, whoever owns it can now depreciate it 100% in the first year.
  Laptops provided to people working in the business are not subject to FBT in most instances.

  The usual way to deal with this is for the OB to contra future invoices with the client until the client has been fully compensated and then buy the machine for $1.

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  HeWhoKnows on 11/11/2016 - 13:10

  Ring up and ask the tax office or your accountant. Thats the BEST ADVICE!
  We are not qualified to give tax advice.
  In any case the purchase cost of your laptop should be FULLY tax deductible against your income. But at $3,000 Im not sure if you can claim it all at once as an expense or as a depreciable asset.
  Again, speak to the tax office or your accountant.

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  sabracad on 11/11/2016 - 19:35

  Easiest option would be salary sacrifice assuming your employer does this - check first and advise them of your intent assuming ok.

  You pay for the laptop, and hand the invoice to your employer. Your salary is reduced by the GST exclusive price but you receive the GST inclusive amount as a reimbursement (because they get to claim the GST credit).

  You've also then got the benefit of the invoice being in your name in terms of warranty claims or illegal double dipping if that's your thing.