The new financial year has arrived and the Australian Taxation Office has announced a stack of changes that impact tax leaving many people wondering just what this means for their returns.
To help navigate the confusion we’ve put together a list of the top changes and how to make them work for you.
This year, the ATO is expecting a huge spike in people claiming deductions for working from home or for protective items required for their job.
WORKING FROM HOME
A temporary, shortcut method which applies to working from home expenses between March 1 and June 30, 2020 was previously announced in a bid to make it easier for the millions of people who suddenly found themselves barred from the office at the peak of the outbreak.
The special new arrangement will allow people to claim a rate of 80 cents per hour for all their running expenses, instead of calculating costs for specific running expenses as taxpayers would under normal circumstances.
It covers all deductible expenses and can be used by multiple people working from home in the same house.
People claiming their working-from-home expenses using the shortcut method should include the amount at the “other work-related expenses” question in your tax return and include “COVID-hourly rate” as the description.
If you use the shortcut method, all you need to do is keep a record of the hours you worked from home as evidence of your claim. But it is all-inclusive, meaning you can’t claim for any other working-from-home expenses.
Taxpayers can still choose to use one of the other existing methods to calculate their expenses for working from home if they prefer.
Another deduction which is set to be more common due to the coronavirus is protective items such as gloves, face masks or sanitiser needed for work that requires physical proximity with others, including customers and clients.
These items can only be claimed by taxpayers if they paid for them and were not reimbursed.
Industries more likely to claim these expenses include retail, healthcare and hospitality not industry is excluded.
WHAT YOU CAN’T CLAIM
Generally speaking, employees can’t claim the cost of travelling to and from work, and unfortunately working from home due to the health crisis does not change that rule. For example, if you are working from home because of COVID-19 but need to go to your regular office one day per week, your home to work travel is still private travel and cannot be claimed.
REDUCE CLAIMS THAT AREN’T RELEVANT
If you aren’t travelling for work, you can’t claim travel expenses. If you aren’t wearing your work uniform, you can’t claim laundry expenses.
It’s still important to meet the three golden rules:
- You must have spent the money and not have been reimbursed;
- it must relate directly to earning your income; and
- you must have a record to prove it.
What you can claim really depends on your circumstances so be mindful of changes and keep records to protect yourself.
With so many people stood down, losing their jobs or experiencing a reduction in hours and pay due to the virus, millions are now receiving the government’s JobSeeker and JobKeeper payments.
JOBKEEPER AND JOBSEEKER
The good news is that those who have received JobKeeper payments from their employer don’t need to do anything different. The payments will be included as salary and wages or allowances in their regular income statement, which their employer provides directly to the ATO.
Sole traders who have received the JobKeeper payment on behalf of their business will need to include the payments as assessable income for the business.
STAND DOWN PAYMENTS
Some employees may have received a one-off or regular payment after being temporarily stood down due to COVID-19. These payments are also taxable and appear in their income statement and in their return, but if you’re unsure, always check with your employer before lodging your return.
OTHER INCOME TYPES
If you have received other incomes such as income protection, sickness or accident insurance payments, redundancy payments or accrued leave payments ensure they are added in your tax return.
EARLY ACCESS TO SUPERANNUATION
There’s also some good news for those who took advantage of the government scheme allowing early access to superannuation.
If you received early access to your super this year under the special arrangements due to COVID-19, any amounts you’ve withdrawn from super under this program are tax-free and you do not need to declare them in your tax return.
If you have any questions don’t hesitate to contact the team at ABA Tax for assistance.