Claiming mobile phone, internet and device deductions: A Guide

If you use your personal mobile phone, internet, or other devices for work, the Australian Taxation Office (ATO) allows you to claim a portion of those costs as a tax deduction. This applies to employees, sole traders, and anyone who incurs these expenses to earn their income. The key is correctly calculating and substantiating the work-related percentage of your use.

This article is based on the Current Financial Year at the time of writing. We will walk through exactly how you can claim deductions for the work-related portion of your mobile phone, internet, and other personal device expenses.

A common area of confusion observed by Baron Tax & Accounting is the incorrect apportionment of bundled phone and internet plans, particularly for small business owners in Brisbane who work from home. Many clients are initially unsure how to reasonably separate the costs of different services within a single monthly bill, which is a critical step for an accurate ATO claim. This guide will clarify the process.

This guide will break down everything you need to know, including:

• How to determine if you are eligible to make a claim.

• The different methods for calculating your work-use percentage.

• The rules for claiming the purchase cost of your phone or device.

• The specific records you need to keep to support your claim.

Getting these rules right is a fundamental part of lodging your tax return correctly. For a broader look at deductions, you can explore our general guide on what you can claim on tax in Australia.

Eligibility: Who Can Claim Phone and Device Costs?

Before claiming deductions for your mobile phone, internet, or other devices, you must meet the ATO's eligibility criteria. The core principle is that you must have paid for the expenses yourself without being reimbursed, and the expenses must be directly related to earning your income.

This rule applies whether you're an employee, a sole trader, or running your own company. The key is establishing a clear connection between the use of your device and your work activities.

The "Work-Related Use" Test

Your entire claim depends on separating your work-related use from your private use. The ATO requires a clear and reasonable basis for the portion you claim as a work expense.

For example, a project manager in Brisbane who uses her personal mobile to take client calls after hours, send work emails from the train, and access project management software is demonstrating clear work-related use. However, when she uses the same phone to scroll social media or call family, that is private use and cannot be claimed.

According to the ATO, to claim a deduction for a work-related expense:

1. You must have spent the money yourself and were not reimbursed.

2. The expense must be directly related to earning your income.

3. You must have a record to prove it.

This three-part test is the standard for all work-related claims. Your use of the device must be a necessary part of performing your job.

Who Can Make a Claim?

• Employees: If your job requires you to be on-call or use your personal phone and internet for work tasks, you can claim the work-related portion of your bills.

• Sole Traders and Contractors: For the self-employed, a phone and internet connection are often essential business tools. You can claim the percentage of these expenses that relates to running your business.

• Business Owners: If you operate a company, the business can typically claim the full cost of devices and plans it provides to employees for work purposes. If you use a personal device for the business, the same apportionment rules apply.

When You Cannot Claim a Deduction

There are clear situations where a claim is not permitted:

• You've Been Reimbursed: If your employer repays you for your phone or internet bill, you cannot claim a deduction as you are not out of pocket.

• Your Use is Minor or Incidental: If your work-related use is minimal and infrequent, the ATO is likely to consider it incidental and will not allow a claim.

• A Work Phone is Provided: If your employer has already supplied you with a dedicated work phone, you generally cannot claim the costs of your personal phone.

It is vital to be accurate to remain compliant with ATO regulations.

Calculating Your Work-Use Percentage

Once eligibility is confirmed, the next step is to calculate the percentage of your device and internet usage that is for work. This process is known as apportionment. You cannot estimate this figure; the ATO requires a reasonable calculation based on evidence.

The standard method is to keep a usage diary for a continuous four-week period. This provides a representative sample of your work versus private use, which can then be applied across the financial year, provided your work patterns remain consistent.

The Four-Week Diary Method

Keeping a diary for one month is the most robust way to substantiate your claim. The purpose is to create a clear record that separates work use from personal use.

For the representative four-week period, your diary should log key details for each work-related activity:

• Date and time of use.

• Duration of the call or data task.

• The specific work reason (e.g., "Call to client regarding project X," "Uploaded work files," "Responded to work emails").

• The type of use (e.g., phone call, SMS, or data).

After four weeks, you can perform the calculation. For instance, if you made 100 minutes of calls and 40 minutes were for work, your work-use percentage for calls is 40%. A similar calculation should be done for data.

ATO-Approved Calculation Methods

While the diary is the most thorough method, an itemised bill can also be used to calculate call usage.

Method	Description	Best For	ATO Requirements
Four-Week Diary	Manually log all work-related use over a four-week period, covering calls, data, and SMS.	Substantiating data usage, which is often not itemised on bills. Also suitable for variable or mixed usage patterns.	Must be a representative period. Requires records of date, time, duration, and purpose of each work-related use.
Itemised Bill	Review your phone bill, identify all work-related calls, and calculate the percentage based on the total number or duration of calls.	Individuals whose primary work use is making phone calls and whose provider offers detailed, itemised billing.	Data usage must still be justified separately, typically with a diary. The annotated bill must be kept as a record.

A combination approach is often practical. Use an itemised bill for work calls and a diary to track and estimate work-related data usage.

According to the ATO, you can reuse your four-week diary for future tax returns if your work circumstances do not change. However, if you change roles or your duties shift, you must start a new four-week diary to reflect your new usage patterns.

A Practical Example from Brisbane

Sarah, a marketing coordinator in Brisbane, uses her personal mobile for work. Her plan costs $60 a month. She keeps a diary for four weeks and compares it with her itemised bill.

• She made 100 calls in total. Her diary and bill show 35 were to clients and colleagues.

• She used 10GB of data. Her diary estimates 4GB was for work tasks like checking emails, using cloud storage, and managing client social media.

Her calculation:

1. Calls Work Use: (35 work calls ÷ 100 total calls) = 35%

2. Data Work Use: (4GB work data ÷ 10GB total data) = 40%

Sarah averages the two figures to arrive at a reasonable work-use percentage of 37.5%.

Her total phone cost for the year is $720 ($60 x 12). Her deductible amount is $720 x 37.5% = $270. This systematic approach ensures her claim is compliant with ATO rules and is particularly important when personal and work life overlap, a topic covered in our guide to work from home tax deductions.

Claiming the Purchase Cost of Your Devices

Beyond ongoing service costs, the ATO allows you to claim the purchase price of your phone, tablet, or laptop. The rules for claiming mobile phone, mobile internet and other devices deductions vary depending on the cost of the item.

Immediate Deduction for Items Under $300

If your device costs $300 or less, you can claim an immediate deduction for the full work-related portion in the same financial year you bought it.

The apportionment rule still applies. You can only claim the percentage that you use the device for work. For example, if you purchase a phone for $250 and your records show you use it for work 60% of the time, you can claim an immediate deduction of $150 ($250 x 60%).

Depreciation for Devices Over $300

When a device costs more than $300, you must claim its decline in value over several years. This process is called depreciation.

The ATO views the asset as having an "effective life," and you claim a portion of its cost each year as it ages. The concept of depreciation is to match the expense of an asset with the income it helps generate over its useful life.

The ATO provides guidelines on the effective life for different assets. For mobile phones and tablets, this is typically a short period, reflecting the rapid pace of technological change.

Calculating Decline in Value (Depreciation)

The calculation process involves spreading the work-related cost of the asset over its effective life.

Depreciation Process Diagram:

[Purchase Price of Device > $300]
            |
            v
[Determine Work-Use Percentage (%)] ---> [Calculate Work-Related Cost ($)]
            |                                         |
            v                                         v
[Determine ATO Effective Life (Years)] ---> [Divide Work-Related Cost by Effective Life]
            |
            v
[Annual Depreciation Deduction ($)]

Let's use an example. An IT consultant in Brisbane buys a new laptop for $2,200. Her work-use percentage is 80%. The ATO sets the effective life for laptops at three years.

1. Calculate Work-Use Cost:

2. Calculate Annual Depreciation: Using the "prime cost" method:

The consultant can claim a depreciation deduction of $586.67 on her tax return for the next three years. If the laptop is purchased during the year, the first-year depreciation must be pro-rated for the number of days it was held and used for work

First-year deduction = Full annual depreciation × (Days held/used ÷ 365).

Record-Keeping Requirements

An accurate claim is only valid if supported by adequate records. The ATO has strict substantiation rules, and without the correct paperwork, a legitimate deduction can be disallowed. Proper record-keeping for mobile phone, internet, and device deductions is non-negotiable.

Essential Record-Keeping Checklist

To substantiate your claims, you need an organised paper trail. This evidence is required to prove every component of your calculation.

• Proof of Purchase: Keep tax invoices or receipts for the purchase of your devices.

• Monthly Bills: Retain copies of your phone and internet bills for the financial year. If using itemised bills for your calculation, mark the work-related items.

• Four-Week Diary: This is essential for proving your work-use percentage and must reflect a representative usage pattern.

• Depreciation Schedule: For any device costing over $300, you must keep a clear record of your depreciation calculations.

The ATO generally requires you to keep these records for five years from the date you lodge your tax return. A reliable digital or physical storage system is crucial.

Common Mistakes to Avoid

Simple errors in record-keeping can lead to issues with the ATO.

A frequent mistake is claiming 100% of a personal phone bill without justification. Unless you have a separate phone used exclusively for work, the ATO will expect a reasonable split between business and private use. A 100% claim on a single personal device is a significant red flag.

Another common error is failing to adjust your work-use percentage when your circumstances change. If you change jobs or your duties are redefined, your old four-week diary is no longer valid. You must create a new one to reflect your updated usage patterns. For example, a sales professional in Brisbane who moves into an office-based role would need to recalculate their claim to reflect reduced mobile phone use.

Summary

Claiming deductions for your mobile phone, internet, and other devices can significantly reduce your taxable income, but it requires careful adherence to ATO rules.

Key takeaways:

• Eligibility is Key: You must have paid for the expense yourself and it must be directly related to earning your income.

• Apportionment is Non-Negotiable: You must separate work use from private use.

• Use a Four-Week Diary: This is the ATO's preferred method for calculating your work-use percentage, especially for data.

• Know the Price Rules: Claim an immediate deduction for the work portion of devices under $300. Depreciate the work portion of devices costing more than $300 over their effective life.

• Keep Meticulous Records: Retain all receipts, bills, and calculation workings for at least five years.

• Avoid Double-Dipping: If you use the fixed-rate method for working from home, you cannot make a separate claim for phone and internet expenses.

By following these guidelines, you can make a compliant and defensible claim for your mobile phone, internet, and device expenses.

Frequently Asked Questions (FAQs)

Can I claim my entire phone bill if I am always on call?

No, it is highly unlikely. Even if you are required to be on call, the ATO expects that some private use will occur on a personal device. A 100% claim is a major red flag unless you can prove you have a separate device used exclusively for work.

What if my work patterns change during the year?

You must establish a new work-use pattern. If your job role or duties change, your previous four-week diary is no longer representative. You should start a new four-week diary as soon as the change occurs to ensure your claim accurately reflects your usage for the entire year.

Are accessories like phone cases and chargers deductible?

Yes. Accessories such as cases, screen protectors, and chargers are deductible. However, the rule of apportionment still applies. You can only claim the work-related portion, using the same work-use percentage you calculated for the device itself.

Do I need to keep a new diary every single year?

Not necessarily. The ATO allows you to reuse a diary and its calculated work-use percentage for subsequent years, provided your work patterns have not changed. It is good practice to review your circumstances each financial year. If anything has changed, completing a new four-week diary is the safest approach to ensure your claim for mobile phone, internet and other devices deductions remains accurate.

ATO Official Guidance Reference

• ATO - Mobile phone, mobile internet and other devices: https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/deductions-you-can-claim/tools-computers-and-items-you-use-for-work/mobile-phone-mobile-internet-and-other-devices

Final Considerations

The information provided in this article is general in nature and is not intended to be personalised financial or tax advice. The application of tax laws can vary significantly based on your individual circumstances.

To ensure your claims are compliant and fully optimised for your specific situation, it is advisable to consult with a qualified tax professional. They can provide guidance based on a complete understanding of your personal and professional context.

Baron Tax & Accounting

Website: https://www.baronaccounting.com

Email: info@baronaccounting.com

Phone: +61 1300 087 213

Whatsapp: 0450 468 318