Private ruling: Laptop
Date of advice: 11 May 2016
Published: June 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to claim a deduction for the decline in value of a laptop for the period that it is used to play computer games? | A1: No.

Relevant facts and circumstances: Your work involves creating games and game music. As a designer of video games you need to do market research into games and the latest titles relevant to the long term plan of the business. You have purchased a laptop as an asset to be used for your work. You intend to use the laptop entirely for business use and to claim a deduction for it.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 40 | Income Tax Assessment Act 1997 Section 40-25

Reasons for decision: Summary: Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997) indicates that you may claim a deduction for the decline in value of the laptop computer over the time it is used for the purpose of producing assessable income. Section 40-25 of the ITAA 1997 provides for a deduction of an amount equal to the decline in value of a depreciating asset to the extent that it is used to produce assessable income. Therefore you will also need to apportion the deduction to exclude any private use of the computer. In establishing a connection, it must be shown that the outgoing is relevant and incidental to the gaining of assessable income. In most circumstances the playing of video games would be considered to be private use. In some limited circumstances this expense may be characterised as an income producing use and may be included in the depreciation calculation. This was highlighted in Case P30 25 CTBR (NS); Case 94 82 ATC 139 when the Board of review disallowed a claim for the purchase of newspapers by a real estate salesman. The real estate salesperson would gather information from the daily papers to assist him in selling real estate. The salesperson was however, unable to demonstrate that his income was affected by expenditure on the newspapers. The expense retained its private character and the deduction was not allowed. While we acknowledge that the playing of computer games may assist you to carry out your employment duties, the connection is too general or tenuous for the use of the laptop to play computer games to be considered to be for a taxable purpose. This use of the laptop has the character of being for private purposes. Accordingly, you will need to apportion the decline in value deduction of the laptop to exclude the portion of use of the laptop that is attributable to the playing of computer games.