The pandemic COVID-19, along with the bushfires from last year, has caused some major changes in the country. One such change involves tax returns.
The Australian Taxation Office has just made prominent revisions to rules concerning tax return. These rules will be applied to the end of the financial year tax return lodging, which is on 30 June 2020. According to the Assistant Commissioner of the ATO, Karen Foat, these modifications are targeted towards the taxpayers. The office wants to help make filing tax returns a little bit easier.
Since last year, many Australians have suffered from bushfires. While they were trying to get back on their feet, another crisis hit the country and the rest of the world. The novel coronavirus SARS-COV-2, which causes COVID-19, has created a massive change in how people and businesses function. Almost everyone was forced to stay at homes, meaning people had to stop going to work for a while.
As the numbers of those affected slowly decrease, operations start to go back to normal. However, most employees and businesses require a helping hand from the government.
The ATO is just one of the agencies assisting the citizens. It is expected that there will be a significant increase in the number of people claiming tax deductions. A considerable portion will go to those who are working from home, as well as those looking to claim for personal protective equipment. Both situations are just some of the cases with claimable deductions.
The Impact of COVID-19 on Your Tax Return
The ATO has revealed that it is bracing for a tax time unlike any other. Millions of Australians will claim a tax refund for any of the following:
1. Expenses Due to Working From Home
Several Australians have started working from home due to the pandemic. If you are among them, you can gain from a bigger tax refund. The ATO has introduced a simplified method, which you can use to calculate your expenses while working from home.
This new way is a shortcut to the existing method, but it can only be utilised for expenses you have made from 1 March 2020 to 20 June 2020. This approach is applicable to everyone in the same house, as long as they are working from home as well.
The shortcut is to claim 80 cents per hour of work you do at home. It should include all deductible running costs. If you have your partner living in the same house as you, you will both claim the same rate per hour.
Here’s what you need to do:
- Add the total amount of expenses incurred while working from home.
- The sum should be placed under the “other work-related expenses” portion of the tax refund document.
- In the description, place “COVID hourly rate,” telling the ATO that you will use the new method.
You are allowed to claim several types of expenses, including water and electricity. Stationery expenses are included as well.
What is truly great about the new method is that you only have to provide proof for the hours you worked from home. It will be used as the primary evidence of your claim. Simply log the number of hours and calculate the expenses according to these hours.
Remember, however, that this method is all-inclusive. Therefore, you cannot claim for other expenses incurred while working from home.
Of course, if you do not like this new method, you can always switch back to the old one. In the traditional calculation, you will have to compute the costs individually for each running expense. For example, if you use the Internet for your job, the amount to claim will be based on how you utilised it. If the Internet time was for entertainment, you could not claim it.
On the other hand, the new calculation is where you simply claim a flat rate of 80 cents for every hour you work at home. Tax deductions, however, cannot be claimed if you are simply performing minimal tasks, such as answering phone calls and replying to emails.
2. Protective Equipment
The pandemic has caused a massive spike in personal protective equipment (PPE) purchases. N95 masks, surgical masks, gloves, and goggles are just some of the required PPE for those at the front lines. Your tax refund covers the protective equipment you had to buy during the coronavirus and bushfires. Be sure to list them in the items you want to claim on your tax return.
Some taxpayers, due to the nature of their jobs, have to be in close contact with patients or customers. Therefore, they have to protect themselves while carrying out their day-to-day tasks. Health officials have approved and recommended ways to prevent the spread of the virus. These measures include buying items, including the PPE mentioned earlier. Additional costs also go to purchases of sanitisers and sprays.
If you are a part of this group, you may have paid for the products without getting reimbursed. The good news is that you can claim these expenses. However, you need to prove that you needed them for your job. Those in the hospitality industry, as well as healthcare and retail, can quickly get their refund.
3. Employment Loss or Other Changes
For those out of work, the tax offset may help, which provides relief up to $1,080 for workers. The amount will depend on the total income of the employee. For instance, if you earn lower than $37,000, you can receive up to $225. Meanwhile, if your earnings are between $37,000 and $126,000, you can get the full amount of $1,080.
Because of the reduction in the overall hours for the entire year, as well as job losses, your employer may have deducted too much out of your tax. You can use the ATO calculator to help you figure out the amount to be withheld.
4. Government Support Payments
JobKeeper payments will be included in your tax return form under salary and wages (or allowances, if applicable). Your employer should file this piece of information to the Australian Taxation Office directly. Plus, it should be applied to your tax return by July.
If you are a sole trader, you may have already received your JobKeeper payment by this time. It is one of the assistance programs of the government to help those with businesses that the pandemic has affected. This payment should be included in your business’ assessable income.
Meanwhile, if you are a worker who recently applied for the JobSeeker program, there are no requirements for you at the moment. The ATO may change the information, but all answers will soon be available through the Government Payments and Allowances section of the website.
If you claim for redundancy or stand down payments as a lump sum, be aware that they are taxable. Therefore, you should add them to your income statement.
It is also required that all workers provide their other sources of income, whether it is from payments for accidents, sickness, or income protection.
The ATO has also confirmed that numerous Australians accessed their super earlier than normal. They mostly utilised the funds to cope with the virus and the resulting restrictions. If you are among these people, there’s good news for you.
Accessing your super early this year due to COVID-19 will save you from any tax payment. In this case, any amount that you have already withdrawn under the program will remain tax-free. For this reason, you do not need to declare the amount when lodging your tax return.
Noteworthy Tax Return Information
The ATO believes that there will be fewer claims for travel expenses. It is due to the pandemic restrictions which led to shutting down related workplaces, including airlines. Therefore, if you used to travel for work, you cannot claim your expenses anymore because travelling is temporarily disallowed.
So, what if you took a quick trip to the office? Unfortunately, it still does not count, which means you cannot claim a refund for the cost of fuel. Another question you may need an answer for is if you can claim occasional travel expenses to your office when working from home.
Let us say that you are now working from home because of COVID-19. But you have to go to the office on a regular basis or perhaps once per week. Can you claim a tax refund? The answer is no. Travelling from home to work is considered a type of personal travel. Therefore, it cannot be claimed.
There are some exemptions to this rule. If you are allowed to claim car expenses, it will be based on 66 cents per kilometre.
Another thing is laundry expenses, which you cannot claim for the meantime. Most offices and workers stopped all operations. If you have not worn your uniform for work, you cannot claim any laundry cost.
One last thing to remember is that the four golden rules still apply:
- You should have spent the money out of your pocket.
- You were not reimbursed by your employer.
- The expense is directly related to your job and can affect how you earn your income.
- You have sufficient records to prove the purchase or expense.
There are other exceptions as well, including occupancy expenses. You cannot claim rent and mortgage interest, as well as household items, including coffee and milk.