The 2020 Financial Year was certainly one that will not be forgotten – with thanks to COVID-19. The ATO have recognised the effect COVID-19 has had on the country and have introduced a range of measures to support taxpayers though tax time.
How has COVID-19 impacted Work-Related Expenses?
Working from Home Expenses
The ATO has already announced a temporary ‘short-cut method’ that applies from 1 March 2020 to 30 June 2020. It covers all deductible expenses and can be used by multiple people working from home in the same house. People claiming their working from home expenses using the shortcut method, should include the amount at the ‘other work-related expenses’ item in your tax return and include ‘COVID-hourly rate’ as the description.
If you use the shortcut method, all you need to do is keep a record of the hours you worked from home as evidence of your claim. But it is all inclusive, meaning you can’t claim for any other working from home expenses.
Taxpayers can still choose to use one of the other existing methods to calculate their expenses for working from home if they prefer.
Another deduction some people might be claiming due to COVID-19 is expenses for protective items required for work.
Taxpayers working in jobs that require physical contact or close proximity with customers or clients during COVID-19 measures may be able to claim a deduction for items such as gloves, face masks, sanitiser or anti-bacterial spray if they have paid for the items and not been reimbursed. This includes industries like healthcare, retail and hospitality.
You still cannot claim travelling from home to work
Generally, most people cannot claim the cost of travelling to and from work, working from home as a result of COVID-19 does not change this. For example, if you are working from home because of COVID-19 but need to go to your regular office one day per week, your home to work travel is still private travel and cannot be claimed.
Reduce claims that aren’t relevant for part of the year
With more people working from home, working reduced hours or unfortunately not working at all, we expect to see claims for laundry expenses and/or travel expenses decline this year.
It is still important to meet the three golden rules:
- you must have spent the money and not have been reimbursed,
- it must relate directly to earning your income, and
- you must have a record to prove it.
What if my income is different from prior years?
JobKeeper and JobSeeker
Taxpayers who have received JobKeeper payments from their employer, don’t need to do anything different. The payments will be included as salary and wages and/or allowances, in their regular income statement, which their employer provides directly to the ATO.
Sole traders who have received the JobKeeper payment on behalf of their business will need to include the payments as assessable income for the business.
If you have received JobSeeker, the ATO will also load this information into your tax return at the Government Payments and Allowances item once it’s ready. If you are lodging before this information is included for you, you will need to make sure you include it. Leaving out income can slow your return down or result in a tax bill later so it’s definitely best avoided.
Stand Down Payments
Some employees may have received a one-off or regular payment after being temporarily stood down due to COVID-19. These payments are also taxable and appear in their income statement and in their return. If people aren’t sure whether these amounts have been included in their income statement, they should check with their employer.
Other Income Types
Similarly, taxpayers need to include income such as income protection, sickness or accident insurance payments, redundancy payments and accrued leave payments in their tax return.
Early Access to Superannuation
If you received early access to your super this year under the special arrangements due to COVID-19, any amounts you’ve withdrawn from super under this program are tax-free and you do not need to declare them in your tax return.
Our team are always here to assist in any way possible and should you have any questions in relation to your 2020 Tax Return or any other matters, please do not hesitate to contact your Client Manager.