The COVID-19 pandemic has impacted many things this year and the next item on the list may be your taxes. If you’ve been working at home, you can claim working from home expenses, and if you’ve received financial hardship stimulus payments from the government, you’ll need to declare these payments as income.
Claiming working from home operating expenses
The Australian Tax Office (ATO) has introduced new arrangements for claiming expenses if you are working from home due to COVID-19.
The new arrangement allows people to claim a rate of 80 cents for each hour you work from home for all of their running expenses, instead of calculating costs for specific running expenses, as is usually required. You are also no longer required to have a dedicated home office area in order to claim. Multiple people living in the same house can claim this per hour rate individually.
Ideally, you would have kept track of how many hours you’ve worked from home and can use that data to make your calculations. If not, make a reasonable estimate of time spent each week multiplied by the number of weeks you have been working from home.
However, note that this new arrangement only applies from 1 March through to the end of the financial year (30 June), so if you were working from home prior to this, you will need to use one of the pre-existing methods for claiming work from home deductions. As always, you should talk to your tax agent about which approach makes the most sense for your circumstances.
Claiming other working from home expenses
The pandemic also saw many people who had never worked from home before rushing out to buy home office furniture. You can claim all of these expenses too, so long as it is you who have spent the money (i.e. your employer can’t have reimbursed the cost) and the expense is directly related to earning your income. You must have a receipt to prove the expense.
As much as we’d like to tell you can deduct those Campos coffee beans, unfortunately expenses you cannot claim include the cost of general household items such as coffee, tea and milk, which your employer may otherwise have provided. You also cannot claim occupancy expenses, such as your mortgage interest, rent or rates.
You can find more information from the ATO here.
Reporting government stimulus payments as income
Most government payments are considered taxable income and must be declared on your tax return. Your tax agent will be able to offer further advice.
The government released three different stimulus payments for workers affected by the pandemic: the $1,500 per fortnight JobKeeper payment; the $550 Coronavirus supplement for those on JobSeeker; and the one-off $750 Economic Support payment. Here’s what you need to know about these payments and your taxes.
JobKeeper payments
If you are being paid JobKeeper payments by your employer, tax will be withheld from your payment at the marginal tax rate. If, for some reason, such as you are a sole trader, tax is not withheld and you receive the full $1,500 per fortnight payment, you will need to pay tax on this money. Either way, you must declare all payments received as income.
Find out more about JobKeeper payments from the ATO.
JobSeeker payments and Economic Support payments
While some payments are exempt you must still declare them. So, if in doubt, declare. The standard tax-free thresholds will apply. For example, the tax-free threshold is $18,200, meaning that you aren't subject to tax if your total income from all sources is less than this amount.
Find out more about JobSeeker and Economic Support payments from Services Australia.
Low to middle income tax offsets
Many people may be more eager than usual to file their tax return earlier this year. Factors such as reduced work hours and working from home expenses could mean your return may be higher, or the amount of tax you pay may be lower than usual.
In addition, the 2019-2020 Federal Budget legislated a low to middle income tax offset. The offset is worth anywhere from $255 to the full $1080, depending on your income, with those earning more than $126,000 not receiving any offset.
Find out more on tax offsets from the ATO.
Extended tax filing deadlines
If you have yet to file last year’s tax returns, the deadlines have been extended due to the coronavirus pandemic. Previously due on 15 May 2020, lodgement and payment has been automatically deferred for 2019 company and SMSF income tax returns. Income tax returns for individuals, partnerships and trusts must now be lodged by 5 June 2020. Get in touch with your tax agent if you haven’t already done so.
Contact the ATO and or speak to your accountant or tax agent to find out more about which deadlines apply to your personal circumstances.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.
