With the end of this financial year fast approaching, it is the perfect time to get an updated understanding of office furniture and supplies tax deductions—so you can optimize the value you get from this financial year’s business tax return.
Maximising Tax Deductions: Claiming Office Furniture and Supplies on Tax
Whether you have a traditional brick-and-mortar office or a work-from-home office setup, correctly claiming these expenses has significant benefits for small and medium businesses. The main one is reducing overall business income, which ultimately means paying less tax on it. It also means you have tangible items (that you will use regardless of the running of your business), including office supplies and the furniture for workers and clients at your office.
In this blog, you will find an overview of what you need to know about claiming office furniture on tax, as well as what office supplies are tax deductible. You will gain an understanding of what is deductible and how to categorize these items.
Disclaimer: The advice offered below is general in nature. Ink Station is not a tax professional. Consult with your accountant or a qualified tax professional for advice specific to your business.
Is Office Furniture Tax Deductible?
The quick answer is yes.
Provided that an expense is related directly to earning your taxable income, as a business owner, you are entitled to claim a tax deduction for expenses that form part of running your business. And clearly, you and your employees need furniture at your workplace in order to carry out your tasks.
Whether you are a sole trader, are in a partnership, or have a company, you can make tax-deductible office furniture claims when lodging your required tax return.
Some of the criteria that make office furniture tax deductible include:
- The expense must be for business use (not private use)
- If the expense is used for both private and business purposes, you may only claim the proportion that is used for business.
- As a business owner, you are required to maintain records to substantiate expenses.
Some office furniture that you can claim a tax deduction on include chairs and desks, cabinets, shelves, and other storage furniture used for your business.
Remember that keeping records is key (so that you can prove the purchases), that you were not reimbursed for the cost, that you must have spent the money yourself, and that the expense is job-related.
How to Claim Office Furniture on Tax
So, how do you go about making a claim? The following are some practical tips on how to claim office furniture on tax.
Steps to Claim Office Furniture
If the office furniture item cost is $300 or less, and if you use it for more than half the time for work purposes, you can claim an immediate deduction on it.
However, there are two further provisos:
- The item must not be part of an interdependent set that is normally marketed as such (and designed to be used together), such as a set of several training CDs that progressively build skills. In this instance, if the individual CDs cost $70 each but a set of five costs $350, and if the whole set was purchased, then it cannot be claimed for immediate deduction.
- The item is not part of a number of identical or substantially identical items. This means that if you purchase ten office chairs, each costing $100 and $1000 in total, you cannot make an immediate ‘under $300’ claim for each individual chair.
For items that are $300 or more, you may claim a decline-in-value deduction over its practical life. The category you would use here is ‘other work expenses’. Click here to find out more.
Depreciation and Capital Expenses
Seeing that it pertains to tangible assets, the office furniture tax category you would usually use is ‘capital expense’.
Capital expenses are the costs of buying assets that are practically useful over several years and include other types of office items such as printers, computers and other equipment, including desk lamps, power boards and charging cables.
Because the capital assets will be utilised in your business over several years, their tax deduction will be expressed as a depreciation expense. This allows you to claim the cost of the assets as a tax deduction over the period of time the assets will be of functional use.
Are Office Supplies Tax Deductible?
You may also be wondering, ‘Are office supplies tax deductible?’. Well, if you use office supply items as part of your usual activities to generate a taxable business income, it is highly likely to be tax deductible.
One example is stationery such as pens and notepads, which you or other office workers use to jot down notes during a meeting.
What Office Supplies Are Tax Deductible?
Some of the stationery and office supplies that are used for work whose cost can be claimed as a tax deduction include:
- Diaries
- Logbooks
- Whiteboards
- Calculators
- Printer ink
- Envelopes
- Printing paper
- Pens and pencils
- Erasers, rulers, scissors and staplers
Stationery and other office supplies are usually considered small expenses, and you can deduct the cost of the items immediately. However, if the cost is $300 or more, and if they are part of a set or are to a large degree identical, they are usually categorized as depreciating assets. This means their value decreases over a period of time. For instance, if you buy a phone costing at least $300 for home use, you cannot claim its total cost in the year of purchase. Instead, you can claim the decline in value of the telephone over its useful life.
Final Thoughts on Office Furniture and Supplies on Tax Deductions
Regardless if it is for your home office or commercial business premises, if you plan on claiming office furniture on your tax return, you must remember to keep comprehensive records of your office furniture expenses. The ATO is strict about tax deductions, and many people lack proper documentation for office furniture when making claims. Ensure all your office furniture expense records are accurate so that your tax claims are correct. This is made easier if you have kept your office furniture and supplies receipts or if you are about to or have recently made these purchases. Remember that documentation is vital. And be sure to seek professional advice for your business tax matters.