As June 30 quickly approaches – now is the season to start planning for tax time.
Changes thrust upon Australians during the COVID-19 crisis have led to a raft of new changes this year which are likely to affect you.
Stimulus measures designed to assist millions of workers who found themselves unemployed or relying on assistance will need to be considered as you complete your tax return in 2020.
For those sent home to work due to office closures, it pays to understand which deductions you may be entitled to claim in order to maximise your refund or reduce your tax bill.
Here’s a handy overview of everything you need to know.
When the COVID-19 crisis hit, the Australian Government stepped in with a range of stimulus measures, including the JobKeeper wage subsidy and an increased JobSeeker payment.
For tax purposes in 2020, JobKeeper and JobSeeker payments are treated the same way as your normal wage and will need to be reported at tax time.
“Those people who are receiving JobKeeper don’t need to do anything as these payments will show up on your payment summary, reported by your employer as per usual,” said eTeam Tax Director Ross Morello.
“For JobSeeker recipients, Centrelink will provide you with the equivalent of a payment summary so you can see exactly how much you’ve been paid at the end of the financial year.”
And if your pay was lower than normal during the stimulus period, there could be a silver lining.
“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,” Mr Morello said.
“When you are paid every week or fortnight, the amount of tax withheld is based on your pay rate for 52 weeks of the year.
“If your pay drops for part of the year you will have continued to have tax withheld at a higher amount than you’ve actually earnt for the year. That in itself could boost your refund.”
WORKING FROM HOME
For those Australians unable to attend their usual workplace during the coronavirus period, the additional running expenses you incur while working from home can be claimed at tax time.
To make that as easy as possible, the Australian Taxation Office (ATO) has rolled out a new working from home shortcut to capture the full gamut of expenses covered.
Instead of calculating specific costs, this new arrangement allows taxpayers to claim a rate of 80 cents per hour for additional running expenses, including:
- Electricity expenses associated with heating, cooling and lighting the area from which you are working and running items you are using for work;
- Cleaning costs for a dedicated work area;
- Phone and internet expenses;
- Computer consumables (for example, printer paper and ink) and stationery;
“If you’re working a standard 38-hour week from home due to Covid-19, drought or bushfires, you may be able to claim the shortcut method of 80 cents per hour for the duration of the time you’ve worked at home,” Mr Morello said.
As an example, a person who is eligible for the shortcut method and has worked from home from April 1 - June 30, working 38 hours per week, can claim $395 in deductions using the shortcut method.
Simple as it may sound, that shortcut may not lead to the best outcome for everyone.
“If you’ve incurred the cost of certain items to do your job, such as a new desk, computer, iPad or monitor, those costs may exceed what you can claim using the ATO shortcut,” he said.
Another approach is to use the regular home office tax rules, whereby specific running expenses are calculated at a rate of 52c per hour and additional deductions claimed for items purchased to do your job.
You will need to keep a record of the costs you’ve incurred, including receipts, whereas those using the shortcut method only need record the dates and hours you’ve worked at home.
“For those using the eTeam Tax service, the agent handling your return can advise you on the best method, based on your individual circumstances,” Mr Morello said.
THE TAX OFFSET
In a win for potential refunds or reducing your overall tax bill, the Low and Middle Income Tax Offset is back on the table again in 2020.
Depending on how much you earn, the offset is worth anywhere from $255 to the full $1080 — meaning a bigger refund or a lesser tax bill.
“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,” Mr Morello said.
“There’s no need to apply for the offset separately, it’s calculated automatically when you lodge your tax return.”
The earning thresholds have changed slightly this year too: those earning below $37,000 can claim $255; workers earning $48,000-$90,000 receive the full $1080 offset; while $126,000 plus earners are not eligible.
WHEN TO LODGE
With group certificates now a thing of the past, employers report workers’ income, superannuation and tax information directly to the ATO using a Single Touch Payroll system.
When it comes to lodging your tax return in 2020, workers will need to wait until their final pay for the 2019-2020 tax year has been submitted by your employer.
“The ATO typically advises not to lodge your tax return until those figures are finalised,” Mr Morello said.
“If you do lodge too early and those figures change, you could end up with an increased refund in the best case scenario or a having to pay tax back in the worst case.”
Employers with less than 19 employees have until July 31 to submit all wage information while those with 20 or more employees must finalise by July 14.
For those keen to get the ball rolling as early as possible, the key is to have your Tax File Number (TFN) ready to go.
“If you’ve got your Tax File Number, the rest is straightforward,” Mr Morello said.
“When you lodge your return online, the Tax File Number allows the accountant handling your claim to add you to our tax agent portal and access what’s called your pre-fill report — all of your pay slips submitted by your employer will be available in there.”
You can locate your TFN in a number of different ways:
- A previous year’s tax return
- A PAYG summary (issued by your employer)
- A previous year’s Notice of Assessment (issued by the ATO)
- Ask your employer (they should have your TFN on file)
- Your superannuation member statement
Once you have your TFN, standard information such as your name, date of birth, email and phone number are all that’s required to get the ball rolling on your online return.