Why your tax refund will be bigger in 2020
- Tax withheld at a higher rate
- The $1080 offset is back
- Working from home deductions
- How to get your refund sooner
While the first half of 2020 has been a financial fiasco for many Australians, there could be a silver lining come tax time.
For those who’ve felt the squeeze in recent months, the good news is that your tax return could yield a fatter than normal refund this year.
eTeam Tax Director Ross Morello explains the reasons why more Australians should get more tax back in 2020.
Tax withheld at a higher rate
When COVID-19 all but wiped out certain sectors of the workforce in March, the Australian Government stepped in with a range of stimulus measures, including the JobKeeper wage subsidy and an increased JobSeeker payment.
While those supports have been a lifesaver, for some workers that income may have been lower than what they were earning pre-pandemic — which could see more money back in your pocket come tax time.
“Your rate of pay may differ under JobKeeper and JobSeeker which could lead to a higher refund this year for those employees who’ve taken a pay cut during the COVID-19 period,” says Mr Morello.
The $1080 tax offset is back
The Low and Middle Income Tax Offset is back on the table again in 2020, paving the way for a potentially bigger refund, or in some cases, you’ll pay less tax if you do receive a tax bill.
Depending on how much you have earned, the offset is worth anywhere from $255 to the full $1080 — but that money isn’t paid out as a lump sum.
“The thing to understand is that this is a tax offset, meaning it’s calculated to reduce your overall tax bill which may result in a refund, but it’s not a straight lump sum paid in addition to your refund,” says Mr Morello.
The earning thresholds have changed slightly this year too:
- Those earning below $37,000 can claim $255;
- If you earn between $37,001 and $48,000, you can claim $255 plus 7.5 cents per dollar over $37,000 (up to a maximum of $1080);
- Workers earning between $48,000 and $90,000 receive the full $1080 offset;
- Those earning between $90,001 and $126,000 can claim an offset amount of $1080 minus 3 cents per dollar over $90,000;
- Those who earn more than $126,000 aren’t eligible.
Working from home expenses
Those who were sent home to work during the COVID-19 pandemic will have incurred additional expenses — these could amount to a boost to your tax refund in 2020.
“If you’ve been working from home you will be able to claim a portion of your household running costs, such as heating, cooling, lighting and cleaning for that period,” says Mr Morello.
Worked-related mobile phone and internet expenses, as well as computer consumables such as paper and ink, can also be claimed as deductions, as well items purchased to do your job, such as a new desk, chair, monitor, iPad or headset.
To make it easier for people to claim working from home deductions the ATO has this year introduced a new shortcut whereby taxpayers can claim a rate of 80 cents per hour for all additional running expenses.
However, Mr Morello advises that approach may not result in the best outcome for those whose costs exceed what’s being offered under the concessionary rate.
“You may see a better result by claiming running expenses at the regular home office rate of 52c per hour and then claim any specific items purchased to do your job as additional deductions,” he says.
“Lean on the expertise of the tax professional handling your return to determine the best method for your circumstances.”
Busy tax season could lead to issues
Accountants are bracing for a particularly busy tax season this year, with plenty of Australians eager to get their hands on their refund as soon as possible.
The recent measures by the Australian Tax Office and industry leaders mean some of those recipients will be entitled to refunds, but others will find themselves owing money to the tax office.
Experts are meanwhile warning that Australians expecting a hefty refund in 2020 could be in for a rude awakening when their return is assessed.
Australians wanting their best refund are being urged by industry experts to complete their tax return online to help ensure their refund doesn't get lost in the confusion.
The concept of the new online tax return service is simple: you take a 3-minute tax return quiz and the platform automatically helps ensure your tax return is completed and lodged by professional accountants.
The online service automatically asks you relevant questions in plain English based on your needs and connects with the ATO Tax Portal so you don't have to spend hours completing the tax return yourself. When you complete the tax return quiz, professional accountants review and finalise your return ensuring you don't miss out on any deductions or any Australian tax requirements.
The company intends to make money from their platform by taking a small commission from those who have complex deductions or income sources. The service is free to start for a limited time and you will only be charged if you have complex requirements. For everyone else, the service automatically has fee from refund meaning with your acknowledgement the service can withdraw their small fee from your tax refund directly via the ATO meaning you don't have to pay anything out-of-pocket.
To save money with tax returns, people had to complete their tax return the old way and spend hours and hours, ensuring they have met all government requirements, or risk losing their tax refund completely.
This quiz can now help the everyday Australian save hundreds of dollars easier and lodge their tax return online without doing the hard work themselves.