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The Linux distillery Linux, Mac users - your copy of Windows may be tax deductible
The Linux distillery Linux, Mac users - your copy of Windows may be tax deductible | Linux, Mac users - your copy of Windows may be tax deductible |
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| by David M Williams | |
| Thursday, 16 July 2009 | |
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Page 2 of 2 According to private ruling authorisation number 35145 taxpayers are eligible to claim a deduction for the expense incurred in purchasing computer software that enabled e-tax to be used to complete income tax returns.Featured Whitepaper
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However I believe the principles it espouses hold true for any non-Windows user for this year. This said, I am neither a lawyer nor accountant so you ought to read the ruling yourself to be certain you are as persuaded as I am. Typically, the Income Tax Assessment Act 1997 (ITAA 1997) allows losses and outgoings to be deducted when they are incurred in gaining or producing assessable income with certain exceptions. Capital items or private expenses are not permissible, for instance. Yet, expenses incurred by a taxpayer for managing income tax affairs is explicitly permitted as a tax deduction under section 25-5 of the ITAA 1997. This section provides that property used for managing tax affairs is considered to property used for the purpose of producing assessable income which thus makes them permissible deductions. The constraint against capital expenditure still holds – so, while you may purchase a computer to run e-tax you can’t just deduct the cost, because it is a capital expense. Yet, the decline in value - that is, the depreciation - is deductible for the extent that you use the capital item for the purpose of preparing your tax return. The ruling states that this is true for computer software as much as it is for the computer itself. That is, computer software – specifically, Microsoft Windows – is not deductible because it is a capital item. However, any use you make of the software for an income-tax related matter will be taken to be for the purpose of producing assessable income and consequently depreciation may be claimed. This deduction is to be calculated over 2.5 years, or 40% per annum meaning you can reclaim up to 40% in year one, up to 40% in year two and up to 20% in year three. The amount of depreciation claimed must be apportioned to the extent the software is used for the purpose of producing assessable income. This means if your purchase of Microsoft Windows is solely for running e-tax in a virtual environment on a Linux or Macintosh computer then it is entirely deductible. Please note the ruling notes deductions must be substantiated and this includes a record of the supplier, purchase price and date of purchase. If you use the software for other purposes then a diary must be recorded to determine the portion that can be deducted. Nevertheless, the good news is that if you do need to buy Microsoft Windows then it will cease to be the ‘Windows tax’ as it is often described by free software advocates, and instead be the Windows tax-deduction. |
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