Private ruling: Work related expenses - decline in value depreciation deduction
Date of advice: 10 February 2023
Published: 3 April 2023
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can you claim the cost for purchase of a watch with special characteristics as a decline in value deduction? | A1: As part of your employment, you are required to use a watch with special characteristics (the watch), which enables you to perform your specific employment role. The watch your employer supplied did not meet your requirements for you to work effectively, you have discussed this with your employer, and as a result you have purchased a new watch that meets your needs. As agreed by your employer, you have personally purchased the new watch, which they have authorised and confirmed that it has all of the required characteristics to enable you to perform your employment role. For any equipment that you purchase, you must provide sufficient substantiation for your claims. For capital assets the decline in value of the asset is to be claimed over time under Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997). Division 40 allows a deduction for the cost of a depreciating asset by spreading the deduction over the effective life of the asset, and subdivision 40-B provides the rules for making this deduction. Section 40-25 of the ITAA 1997 allows a taxpayer to deduct an amount equal to the decline in value of a depreciating asset which is held for any time during an income year and used for a taxable purpose. A taxable purpose includes the purpose of producing assessable income (subsection 40-25(7) of the ITAA 1997). As the watch you have purchased is directly related to producing assessable income and you have not been reimbursed for purchasing the new watch by your employer, a deduction is allowed under section 40-25 of the ITAA 1997 .

Relevant facts and circumstances: You are an Australian resident for taxation purposes. You are an employee of an Australian employer. To preform your duties you are required to use a watch with special characteristics to complete your work to a satisfactory level. After using the watch your employer supplied, due to ongoing faults, and after discussing the matter with your employer, you purchased a new watch which has all of the required special characteristics to complete your work. You have supplied a letter from your employer which states the following in support of your private ruling request: • A device, such as the watch you have purchased greatly enhances your effectiveness in your employment role. • Without such a device, your efficiency would decrease and it would potentially induce errors. • In addition, your duties are completed in a place in which personal electronic devices such as smart watches are not allowed. • Therefore, the features that a device has and does not have greatly limit what items you can use to assist in the conduct of your duties. • Your employer does provide a watch with the required features to complete your work duties. However, you found that the employer provided watch to be very unreliable, frequently required servicing and had previously stopped working during a time sensitive task that required you to adopt a less efficient process. • You exchanged the employer provided watch for a different one on multiple occasions due to faults. • You eventually elected to return the employer supplied watch and purchase your own watch, which includes the required features to conduct your duties, and which also complies with your employer's security and uniform requirements. • You have not been reimbursed for the purchase of the new watch by your employer. You have substantiation to support your claims.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 40-25