7 tax tips: what COVID-19 could mean for your 2020 tax return
Lockdown may have caused countless hours of boredom, but the world doesn’t stop on its axis it keeps spinning and the months actually seem to pass by quicker every year. With that in mind, it’s once again time to think about lodging your tax return. The question is: how will COVID-19 affect your tax return this financial year?
The answer: the COVID-19 lockdown could have a positive impact on your tax return and deliver you much needed financial relief.
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Of course, general rules of account keeping apply, so don’t think that just because you are working from home you can claim whatever you want. However the Australian Tax Office (ATO) has made life easier this year to expense claim.
So what should you do to get yourself ready. Here’s a list of 10 tax tips to get you started on your tax return.
1. Continue to do the basics
The tax office loves it when you have your paperwork in order, so spend a day or two compiling invoices and receipts for work-related expenses. Gather up any bank/credit card statements for work expenses you’ve lost invoices for.
The simple rule is no paperwork, no deduction.
2. Working from home could mean less deductions
Self-isolation has forced many Australians to work from home. This means that the tax deductions we normally claim have altered.
It is unlikely you will claim travel, accommodation or clothing expenses. Professional development may have also been struck off the list along with subscriptions as belts were tightened.
However, working from home has also seen a run on purchases for home-based office equipment, which means you should understand what more you can claim on top of your usual work from home expenses.
3. Working from home could mean more deductions
Have you gone out to buy desk chairs, desks, monitors, computers, furniture? If you have, you can claim it.
Usual work-related household expenses include heating, cooling and lighting bills. You can also claim cleaning products or the cost of a cleaner to clean your workspace. Depreciation of home office furniture and fittings, as well as office equipment and computers and the costs of repairing home office equipment, furniture and furnishings can also be claimed.
Even better is furniture and computer equipment that costs less than $300 (known in the tax world as ‘small capital items’) such as can be written off in full immediately and do not need to be depreciated.
Calculate how much of your mobile phone use is work related and deduct that and also the amount you have spent on consumable such as ink and stationery.
4. The 80 cents per hour rule
This year is a little different to other years. This year, we have seen the introduction of the ‘80 cents per hour’ rule.
To make it easier for people to calculate their tax returns, the ATO is allowing people to claim a rate of 80 cents per work hour during the coronavirus crisis.
The ‘80 cents per hour’ applies from 1 March 2020 and will run until at least 30 June 2020. An assessment of the length of this scheme will be made once the working world returns to normal.
As with any deduction, you must keep a record of hours worked due to COVID-19.
If you use ‘80 cents per hour’, you have to stick with it and use it for all deductions.
5. The usual way to calculate your tax
The ATO’s existing flat rate allowance still exists.
Those who have used the flat rate in previous years to calculate their tax, can still do so at 52 cents per hour.
You may be thinking, but 80 cents per hour is better.
Yes and no.
When you claim your 52 cents per hour, you can claim more, including the extra costs of heating, cooling, lighting and the decline in value of furniture.
Keep records. All paths with tax lead to point one: continue to do the basics. Record when you start work, when you finish work, your lunch break coffee break smoko.
Where you may also get ahead here is in separate claims for work-related proportion of use for home internet, mobile phone and expenses that directly relate to your work.
Furthermore, you can claim the actual costs you’ve incurred, but you’ll need to keep all original bills.
So you decide, make it easy on yourself and claim 80 cents per hour, or take the time to process the invoices and receipts and calculations and potentially claim more.
6. Automatic offset
This year the Federal government’s tax offset will provide up to $1,080 relief for workers, depending on your total income.
Those earning under $37,000 will receive $225 or less, while those who earned between $37,000 and $126,000 will receive up to the full $1,080.
Those on more than $126,000, will be ineligible for the offset.
The good news is the payment will be automatically applied when you lodge your tax return.
7. Go to a tax agent
The H&R Blocks and ITPs of the world can make your tax return even more simple. Let them do the work for a small fee. They are surprisingly affordable.