Tax time. Maths nerd Christmas. It’s here once again. But as we emerge from the pandemic, we find that just as the world has changed, the list of things we can reasonably claim on tax has changed too.
Work from home has altered a lot about the way we live our daily lives. Understanding that WFH had become a significant part of the working week for many, The Australian Tax Office (ATO) had to make a few changes to the criteria around deductibles to reflect the new dominance of the home office. Amongst the items you can submit as deductions at tax time, there may be a litany of gaming gear you’ve purchased in the last year that match the new criteria. That’s pretty good news for WFH gamers.
I see you getting excited, but hold on. Before we get into the gaming items you can claim on tax this year, we need to establish a few ground rules. I know, I know, you want the tax time juice but cool your jets for a second because this is important.
Deductions, and how they work
You’re already yawning, I can tell. I’m going to try to explain this in a way that’s fun as well as informative because I know reading taxation information will put some of you straight to sleep. I cannot blame you for this.
Tax deductions are work-related expenses you can claim in your tax return. Deductions cover items you’ve purchased out-of-pocket to assist you in earning an income as an employee. If it sounds like I’m being very careful with the language here it’s because I am.
Work-related expenses have to satisfy three important bullet points to be considered a deduction:
- You need to have spent the money to pay for each item yourself. Purchases that were reimbursed by your employer do not count.
- Any expenses you wish to deduct must be directly related to earning your income. Unless owning a PS5 is a critical component in performing your daily job, you can’t just chuck one on the list. Anything you plan to use professionally AND privately is fine, but you’ll only be able to claim a partial deduction related to its use in your work.
- Anything you want to deduct will require proof of purchase, so make sure you keep your receipts. If you’re bad at hanging onto paper receipts, and a lot of us are, here’s a hot tip: take a photo of the receipt on your phone the second you have it in your hand and upload it to Dropbox or your Google Drive. It’s a small and simple habit to get into, it takes five seconds, and you’ll never lose a receipt again.
If you want more information on what is and isn’t considered a deduction, you can head over to the ATO website. They have all the explainers you need on-site.
How much will I get back?
Much of what we’re about to discuss falls under the Tools, Equipment, and Other Assets subcategory. What you can claim on your deduction can vary from item to item, so make sure you speak to a licensed tax agent if you aren’t sure.
The amount you can typically claim is worked out in one of two ways based on the answer to a simple question: did it cost you more or less than $300?
If a tool purchased in the last financial year cost you $300 or less, you can likely claim a full deduction. If the item is part of a set that, in total, cost more than $300, it, unfortunately, can’t be claimed.
If the tool you wish to deduct costs you more than $300, you can claim a deduction for the cost over the life of the item. This effectively means calculating the item’s projected decline in value over time (which the ATO can teach you how to do here). This part can be fairly tricky if you don’t have a head for maths, so, again, always talk to a licensed tax agent if you aren’t sure.
Hang on, what do you mean by ‘set’?
What does the ATO mean when it says ‘set’? I wasn’t sure myself, so I had a chat with the ATO’s tax time spokesperson, Assistant Commissioner Tim Loh, to clarify things.
I asked him about the particulars of building a PC that you could use for work and for gaming after hours. My question was: If I were to purchase all the components needed to build a new PC individually, would I claim them as individual items, or would the finished PC be considered a “set” under the terms laid out by the ATO?
“Where computer components are acquired from different retailers in order to create a new single system which is intended to function as a whole, the components will be taken to form part of a set,” Loh said. “However, say if the items are acquired as replacements or enhancements to an existing computer, each component would be considered separately and not part of a set.”
In layman’s terms: Building a PC from scratch means the ATO considers the completed PC a ‘set’ because it’s made out of parts designed to work together. If you’re just replacing a dead graphics card in an existing system, or upgrading an older part to increase performance? That’s a single purchase and can be claimed as normal.
Okay, next question: If you did build a work-from-home PC that doubled as a gaming rig for after-hours play, how would you claim that as a set?
“The assembled computer would be a depreciating asset,” Loh said, “and a deduction could be claimed for the decline in value over its effective life, depending on the method used to claim working from home expenses.”
It’s here that Assistant Commissioner Loh reiterates our earlier, very important qualification: “A deduction for the decline in value cannot be claimed if using the temporary shortcut method, as the method covers all working from home expenses. A claim for the work-related use could be made if the fixed rate or the actual cost methods were used. However, if you are using your computer just to play video games with your mates, you can’t claim a decline in value of the assembled computer at all.”
Simply put: If you’re building a work-from-home PC that also doubles as a gaming rig, you’ll need to be able to prove that you use it for work during the day and calculate its value based on that use alone. If you bought the rig purely for blasting off in Valorant every night with your mates, sadly, you cannot claim it.
Ok, so what can I claim?
Quite a bit, as a matter of fact. Let’s go down the list.
Computers cover laptops, tablets, and prefab desktop PCs. If you needed to buy yourself a new computer for work, and you purchased it as a prefab or all-in-one model, you can deduct it using the asset depreciation method we talked about above. Individual PC parts are also covered for interstitial repairs and replacements. This means that if your graphics card dies on you, you should be able to claim some of it back.
If you bought all the parts individually to build yourself, the finished machine will be considered a set and you’ll have to claim it as a single item. You will also only be able to claim computers and parts based on work use, not personal, which may reduce their value again. Computers constitute the most complex gaming items to deduct at tax time so, and again I cannot stress this enough, speak to a licensed tax agent if think you can claim your PC gear but are unsure how to do it properly. They’ll help you out and you can actually claim their help on tax for next year!
The peripherals umbrella covers all the gear you’ll likely be able to deduct in full. This includes mice, keyboards, headphones, microphones, webcams and external hard drives. Unless you’re after something extremely fancy, most of these should come in under $300.
This section is far fuzzier. You’d be hard-pressed to claim any games back unless games are a significant part of your day-to-day role, but you can likely claim any software you’ve had to buy for work. This could be an Office 365 or Adobe CS subscription, for example. Remember: you must have paid for these things out of pocket, or they do not count. If your work provides you with an Office 365 sub or reimburses the monthly charge, you can’t claim it.
Did you know that if you’re working from home, you can claim a percentage of your home internet and phone expenses? Much like the asset depreciation equation used to determine the size of claims on items over $300, there’s a bit of mathematical gymnastics involved here. Speak to your tax agent and make sure you’re getting this right because it can add up.
If you’re in need of a new office chair or desk for your setup, this could be a good way to see a return on it. Office furniture like gaming chairs, desks and shelving can be claimed on your tax, as they are also considered ‘tools’. The same rules for claims on items above and below $300 apply.
And there you go! These are just a few ideas for gaming items you can claim at tax time this year. As stated throughout, make sure you check with a licensed tax agent to ensure any deductions you make are above board. The last thing anyone wants is to misfile part of their tax return and end up owing the ATO money down the road.
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