When you can claim your phone as a tax deduction and how to do it

From taking and making work-related calls to reading emails and messaging colleagues, mobile phones are a routine part of the workday for many of us.

Which might have you wondering whether you can claim yours as a deduction when you lodge your tax return.

The cost of buying and using your own phone may be tax deductible, but the Australian Taxation Office (ATO) has specific rules about how employees calculate these expenses.

Here's what to know about claiming phones and phone bills as a tax deduction.

When can I claim my phone on tax in Australia?

To claim a deduction for a phone, the ATO says you must have paid for it, used it to perform work duties and have a record of your expenses and use.

How this works depends on how much the phone costs.

The ATO says "an immediate deduction is available for items that cost $300 or less, if you use them more than 50 per cent of the time for work purposes".

An immediate deduction means you can claim the full work-related portion of the cost the year you buy it.

If a phone costs more than $300, "you can claim a deduction for the decline in value over the effective life of the item", according to the ATO.

Chartered Accountants Australia and New Zealand tax lead Susan Franks says she "doubts" anyone is getting a phone for less than $300.

So, she says most people will be using the second option and claiming depreciation on the phone in their tax return.

However, if you work from home and you are using the 70-cents-per-hour fixed-rate method to calculate your deduction, it already includes the cost of your phone.

In that case, "you can't double dip and claim your phone usage, your internet or your data", Ms Franks explains.

What does 'depreciation' mean and how can you calculate it?

Director of the University of Tasmania's Tax Clinic and senior industry fellow in taxation Donovan Castelyn says what depreciation essentially means, in its most basic terms, is you claim a little bit of the value of that item over time.

Mr Castelyn says there are two ways to calculate this: diminishing value or prime cost.

"The easiest way to understand diminishing value is you get a larger up-front deduction and then it diminishes … [as opposed to] prime cost, where you get the same deduction each year over the asset's effective life."

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Connie Vitale, a senior lecturer in accounting and the director of the Western Sydney University Tax Clinic, says the effective life of a mobile phone is three years.

"So, you can claim the depreciation over a three-year period, but you only get to claim the proportion of it that's related to your work."

The ATO says you can choose either method to work out depreciation, but you can't swap when lodging future tax returns that include that item.

The depreciation and capital allowances tool compares the results of the two, but it can also be calculated manually.

What percentage of phone costs can be claimed?

When a mobile phone is used for both private and professional purposes, the ATO says you need to apportion your deduction.

This means working out what percentage of phone use is associated with work and claiming that portion.

If you have a phone plan with an itemised bill, the ATO says you need to work out your work-related percentage over a four-week period or monthly bill using a "reasonable basis".

This can include analysing the number of calls, the amount of time spent on calls and the amount of data used.

The ATO says if you don't receive an itemised phone bill, you can calculate the percentage by recording your private and professional calls and data use over a four-week period.

Or you could work it out by "calculating your claim using a reasonable basis", such as using the number of work calls as a percentage over a representative period or the whole year.

Dr Vitale recommends keeping a logbook to record any work-related phone use for four weeks.

If the way you use your phone for work changes, she suggests redoing a logbook so you can adjust the percentage you claim.

So, you can claim phone bills too?

Dr Vitale says if you complete a four-week logbook, you can also claim that percentage of your phone plan or bill.

The ATO says you must be paying the bill yourself (it can't be getting paid for by work) and using it for work purposes.

Written evidence of expenses is also required, "showing the total amount you incurred and records showing how you calculated your work-related phone calls and data", according to the ATO.

"If it's 40 per cent business, you can claim 40 per cent of the amount [of your phone bill] and you could also claim 40 per cent of the decline in value [depreciation]," Dr Vitale explains.

Claiming "incidental use" of $50 or less with basic records to show how you calculated your claim is another option, she says.

What records or evidence do you need to keep?

The ATO says you must keep records, which can include diary entries (showing how you worked out your percentage of work-related use), mobile phone bills and receipts for phones you buy.

Mr Castelyn says the more evidence you have to substantiate your tax deduction claims, the better.

What if you're a sole trader?

Dr Vitale says someone running their own business (also known as a sole trader) doesn't have to depreciate devices and should take a different approach.

As long as it costs less than $20,000, Dr Vitale says a sole trader can claim an immediate deduction for the cost of a new phone.

"When you've got an individual taxpayer who's working for an employer, it would be in their tax return for three years, [but] if you've got an individual that's a sole trader, it would only be in the tax return for the first year."

However, you still need to calculate the degree of work-related use and only claim that portion.

This is general information only. Consider obtaining advice from a tax professional in relation to your particular circumstances.