The Australian Taxation Office (ATO) recognises that the community hasexperienced significant challenges this year. The ATO’s support and guidanceshould make tax time easier, particularly where new circumstances mean thatpeople are receiving a different type of income or able to claim newdeductions.
Assistant Commissioner Karen Foat said the ATO has a range of differentapproaches to support taxpayers and the community through this tax time.
“We know many of our clients and their agents will have questions about howdifferent types of income and expenses may affect their obligations this year.We’re helping to make sure people know how to get it right.
“We have published information on our website to help you get it right whenlodging this year, including the ‘Tax Time Essentials’ page which is a onestop shop for the things that are a little different this year and how theyimpact your return.
“If you’ve read through the information on our website and still have aquestion, search our online forum ‘ATO Community’. This forum is available 24hours a day and we have a great community of expert members who respond toquestions. In a lot of cases, there’s an ATO-endorsed response to help you. Ifnot, post it yourself and we’ll have a response back to you as quick as wecan.”
How has COVID-19 impacted work-related expenses?
“This tax time the ATO expects to see a substantial increase in peopleclaiming deductions for working from home or for protective items required forwork,” Ms Foat said.
Working from home expenses
The ATO has already announced a temporary ‘short-cut method’ that applies from1 March 2020 to 30 June 2020. The short cut method makes it easier for themillions of Australians who have incurred some form of expense for workingfrom home as a result of COVID-19. It covers all deductible expenses and canbe used by multiple people working from home in the same house. Peopleclaiming their working from home expenses using the shortcut method, shouldinclude the amount at the ‘other work-related expenses’ question in your taxreturn and include ‘COVID-hourly rate’ as the description.
“If you use the shortcut method, all you need to do is keep a record of thehours 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,” Ms Foatsaid.
Taxpayers can still choose to use one of the other existing methods tocalculate their expenses for working from home if they prefer.
Another deduction some people might be claiming due to COVID-19 is expensesfor protective items required for work.
“Taxpayers working in jobs that require physical contact or close proximitywith customers or clients during COVID-19 measures may be able to claim adeduction for items such as gloves, face masks, sanitiser or anti-bacterialspray if they have paid for the items and not been reimbursed. This includesindustries like healthcare, retail and hospitality” Ms Foat said.
You still cannot claim travelling from home to work
“Generally, most people cannot claim the cost of travelling to and from workand working from home as a result of COVID-19 does not change this. Forexample, if you are working from home because of COVID-19 but need to go toyour regular office one day per week, your home to work travel is stillprivate travel and cannot be claimed,” Ms Foat said.
Reduce claims that aren’t relevant for part of the year
“With more people working from home, working reduced hours or unfortunatelynot working at all, we expect to see claims for laundry expenses or travelexpenses decline this year,” Ms Foat said.
“If you aren’t travelling for work, you can’t claim travel expenses. If youaren’t wearing your work uniform, you can’t claim laundry expenses. It’s stillimportant to meet the three golden rules: you must have spent the money andnot have been reimbursed, it must relate directly to earning your income, andyou must have a record to prove it.
“What you can claim really depends on your circumstances. Whilst we are tryingto make it easier for people to claim what they are entitled to; we are alsoasking people to take a bit of extra care if their circumstances have changedthis year.” Ms Foat said.
What if my income is different?
JobKeeper and JobSeeker
Taxpayers who have received JobKeeper payments from their employer, don’t needto do anything different. The payments will be included as salary and wagesand/or allowances, in their regular income statement, which their employerprovides directly to the ATO.
“Your income statement can be accessed via myGov and the information isautomatically included into your tax return by the end of July. If you use atax agent, they also have access to this information. The figures in yourincome statement should already include any JobKeeper you have received. Ifyou aren’t sure, check with your employer.
Sole traders who have received the JobKeeper payment on behalf of theirbusiness will need to include the payments as assessable income for thebusiness.
If you have received JobSeeker, the ATO will also load this information intoyour tax return at the Government Payments and Allowances question once it’sready. If you are lodging before this information is included for you, youwill need to make sure you include it. Leaving out income can slow your returndown or result in a bill later so it’s definitely best avoided.
Stand down payments
Some employees may have received a one-off or regular payment after beingtemporarily stood down due to COVID-19. These payments are also taxable andappear in their income statement and in their return. If people aren’t surewhether these amounts have been included in their income statement, theyshould check with their employer.
Other income types
Similarly, taxpayers need to include income such as income protection,sickness or accident insurance payments, redundancy payments and accrued leavepayments in their tax return. The tax return instructions explain how toinclude these amounts.
Early access to superannuation
“If you received early access to your super this year under the specialarrangements due to COVID-19, any amounts you’ve withdrawn from super underthis program are tax-free and you do not need to declare them in your taxreturn,” Ms Foat said.
The ATO recognises that things are different this year, so we have developedsome useful resources including:
Tax Time Essentials, available at: https://www.ato.gov.au/taxessentials
Example 1 – Barista receiving JobKeeper
Ethan is an employee who works as a barista. After being financially impactedby COVID-19, the café Ethan works for enrolled to receive JobKeeper paymentson his behalf.
The café continues operating as takeaway only and Ethan is given some handsanitiser for use during his shifts. He also purchases a face mask, which heis not reimbursed for. When he completes his tax return, he claims the cost ofthe face mask, ensuring he keeps his receipt as proof of his purchase.
He also checks that his salary and wages and allowances on his incomestatement are up to date, including JobKeeper payments made to him by thecafé. Ethan needs to confirm that his total salary and wages and anyallowances are included in his tax return. Generally, this will be included inhis return by the ATO by the end of July and will include JobKeeper payments.
Example 2 – IT contractor working from home
Natalie is employed by a company that provides IT support. From time to timeNatalie must drive her car from the office to the client’s premises and assistthem on site. Due to COVID-19, Natalie started working from home on 23 Marchand was only able to provide phone support to clients. Natalie purchased a newheadset and stationery, as well as incurring additional phone and internetcosts while working from home.
Natalie decides to claim all her working from home expenses using the newtemporary rate of 80 cents per hour. She uses her time sheets to calculate thehours she worked from home between 23 March and 30 June.
When she completes her tax return, Natalie makes sure she only claims adeduction for the car expenses she incurred when travelling from the office tothe client’s premises. As Natalie worked solely from home for approximatelythree months of the year, mostly supporting clients over the phone, her claimfor car expenses this year is less than her claim for last year.
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