Tax 2020: What can you claim this year?
The end of financial year is here – and that means it’s time to do your annual tax return.
We know; doing your tax is about as exciting as watching paint dry – but if you’re not handing it to an accountant or tax agent this year, it’s worth knowing the changes that have been made to the tax system in 2020.
Bushfires, COVID-19 and widespread job-losses affecting many Australians has led the Australian Taxation Office (ATO) to tweak a few things regarding refunds and deductions this year, especially if you’ve been working from home.
And there have been other changes such as payment summaries – you might normally get this before EOFY, but your employer is now required to report your income, tax and super directly to the ATO (you can find these details via your myGov account). Similarly, health insurers are no longer required to send you a private health insurance statement – your health fund data will be pre-filled in your tax return going forward to save time and ensure accuracy.
Let’s look at what else might impact your tax return before you get the calculator out.
Work-related expenses you can claim
If you worked from home during COVID-19, it’s fine to claim the following:
- Electricity/gas expenses If you popped the heater on in your home office or used a light over your computer, those expenses (or a portion of them) are claimable.
- Cleaning expenses If you have a cleaner who’s given your home office a vacuum and a dust, you can claim that portion of the cleaning fee (but not the rest of the house).
- Phone and internet If your mobile and internet were used for work, the work-related portion can go on your return as an expense.
- Other materials Stationery, printer paper and printer ink are all claimable.
- Home office equipment If you bought a computer, any gadgets such as a printer or phone or even a new swivel chair, you can claim either the full cost of items up to $300 or the decline in value for items over $300.
Work-related expenses you can’t claim
It may seem a bit unfair (especially the tea bags and biscuits) but the following are not accepted as expenses:
- General household items. You may plough through ten cups of tea a day when you’re at work (usually provided by your employer). But if you’re working from home, you unfortunately can’t claim coffee, tea, milk or other general household items. Sorry!
- Homeschooling costs If you had to set your kids up for online learning or buy equipment such as iPads and desks, none of that is claimable.
- Items you were reimbursed for or that your employer paid for As a general rule of thumb, if you’re not out of pocket for a work item, you can’t claim it – even if you use it for work.
- Occupancy expenses Rent, mortgage interest, water and rates are generally not able to be claimed either, even if you are working from home.
- Insurances Although you usually can claim the cost of insurance premiums you pay on income protection insurance against a loss of income, you unfortunately can’t claim other insurances such as life insurance or trauma insurance premiums.
- Travel time It’s a murky area – but if, for example, you’ve largely worked from home during the pandemic and travelled to the office one day a week, that falls under ‘private travel’ and is not claimable. Some travel is claimable, though, as the ATO explains.
- Laundry expenses. Normally you might claim laundry expenses for a work uniform or specific work clothes – but if you’re working from home in your active wear and haven’t needed to wear a uniform or work clothes, that’s not a valid expense.
Working out your expenses
There are a number of methods for working out your expenses if you’re doing your own tax.
The temporary ‘shortcut method’ introduced due to COVID 19 enables you to claim 80c per hour for every hour you worked from home between March 1 to June 30, 2020. You’ll need a record of hours worked from home such as diary entries or a time-sheet as proof.
You can also use a ‘fixed rate method’, to claim 52c per work hour for claiming utilities (heating, lighting for your home office, for example) or the work-related portion of your phone and internet, computer accessories and so on.
You can also use the ‘actual expenses method’, where you claim the actual work-related portion of all your running expenses, within reason of course. As always, it’s important to check which method might be best for your particular circumstance. Get advice from your tax agent if you need to.
The ATO has more info and a home office calculator to help you figure out your working-from-home expenses, but if it all seems too hard or you’re worried about making a mistake, you may wish to chat to a tax agent or accountant.
What else to be aware of this tax year
There are a few other things to take note of before you do your tax.
Aussies financially affected by the pandemic have been able to access their super via an early release campaign – and the good news is if eligible, you don’t need to pay tax on any super you accessed or declare it in your tax return. Ensure you check the eligibility criteria and the implications of accessing your super early. You should consider whether you need to seek financial advice before submitting your application for early release of super and consider working towards contributing those amounts back to your super once you’re financially able to do so – that’s your retirement, after all!
JobKeeper and JobSeeker
On the 20th of March 2020 the Newstart Allowance was renamed the JobSeeker payment, and around the same time the JobKeeper payment was introduced as a temporary subsidy for businesses significantly affected by COVID-19. These government payments were increased or introduced during the lockdown to those who’d lost work – but they count as income and need to be declared on your return. (They should automatically be filled in on your return, but be sure to check before lodging it).
You’ll need to declare all salary and wages, redundancy payments, Centrelink payments, interest you incurred on your savings, income protection payments, sickness payments or accident payments. Oh, and any business income if you run a separate business.
myTax and myGov
If you’re doing your own return, you’ll need to set up a myGov account and link it to the ATO. If you’re lodging it yourself through myTax, you need to lodge it by October 31 (if you use a tax agent or accountant to do it for you, you have more time to lodge it).
Knowing what you can claim ahead of time (and what you can’t!) can make tax time much easier – and it’s also a good time to look at your finances as a whole, including your super and whether you have the right insurances in place for your lifestyle and circumstances.
Don’t forget, if doing your tax just feels too overwhelming, you may wish to seek advice from an accountant or tax agent (or just hand over your shoe box of receipts altogether). Happy EOFY!
29 Jul 2020