For most of us, it’s becoming quicker and easier to lodge our tax returns. You can do your tax from your living room just by logging onto myTax via the myGov portal.
If you’re completing your own tax return you have until 31 October to lodge. If your accountant is lodging for you, and you’ve had a good lodgement history you might be able to lodge your return later than the 31 October deadline. If you opt to go this way, be sure you’ve contacted your tax agent before 31 October to lock in an appointment and confirm lodgement deadlines applicable to you, especially if you’re using a tax agent for the first time, or using a different one.
Of course, the sooner you get your tax return lodged, the quicker you may get any refund you are eligible for. If you’re looking for a little extra motivation, it’s worth noting that as of 16 September 2021, more than 5.93 million individual 2021 refunds have been issued, totalling more than $16.15 billion with an average refund of $2,722.
Although many of the usual rules apply when it comes to your tax return, there have been some changes for the 2020-2021 financial year that it can pay to be aware of as they may affect you.
If you’re unsure about the rules or how they may apply to your situation it can be a good idea to get advice through a tax agent or the Australian Taxation Office (ATO).
Here are seven things to consider ahead of lodging your tax return, including what may be different for the 2020-2021 financial year.
1. Claiming deductions for working from home
More of us began working from home for the first time as a result of COVID-19. There are two main options to claim work from home costs. We have summarised these below, but it’s important that you understand what you can claim based on your own personal circumstances. If in doubt, seek help from a professional or the ATO.
The 80 cents per hour ‘shortcut’ method
The ATO introduced this “shortcut” method for the 2019-2020 financial year in response to COVID-19 and extended it to be available until 30 June, 2021. Instead of sorting different costs like internet and power, you just claim 80 cents per hour for every hour worked from home.
You need to record the hours you worked from home. If, for example, you worked eight hours a day from home, five days a week, you may be able to claim a tax break of $32 per week.
It’s important to note that this shortcut method includes the heating, lighting and cooling, as well as your phone, internet, computer and other expenses. They can’t be claimed separately.
The 52 cents per hour method
This involves claiming 52 cents per hour worked from home for costs like heating, cooling, lighting, and depreciation of your furniture. Then, on top of this, you can also claim a deduction for work-related phone, internet, and stationery plus depreciation in the value of your computer. If you use a lot of internet data for work for instance, the 52 cents method could give you a bigger tax deduction. But you need receipts for the additional costs claimed.
It may be worth crunching the numbers to see which of the two methods will give you a better result. If you’re not sure, talk to your tax agent or visit the ATO website for more details.
2. JobSeeker and JobKeeper payments need to be included in your tax return
Plenty of people have had to rely on either JobSeeker or JobKeeper payments to stay afloat financially.
If you received either of these payments you need to declare it in your tax return. The ATO will pre-fill information about any JobSeeker payments into the ‘Australian government allowances and payments’ section of your tax return.
If you received JobKeeper payments from your employer, you don’t have to do anything differently. “Your employer will report these payments as either salary and wages or an allowance on your income statement,” explains the ATO. “If you lodge your tax return online this information will automatically pre-fill for you when your employer finalises your income statement. Tax agents will also have access to this information.”
If you’re a sole trader who received JobKeeper payments on behalf of your business, you will need to include the payments as assessable income in your tax return. According to the ATO, you will be able to see the total amount of JobKeeper payments you received in your online services for business accounts or online services for individuals and sole traders through myGov. “These amounts are ‘information only’. You will need to check and enter these amounts into your tax return,” warns the ATO.
3. You need to include Pandemic Leave Disaster Payments in your tax return
The government introduced a Pandemic Leave Disaster Payment to support those who can’t earn an income because they must self-isolate or quarantine, or are caring for someone with COVID-19.
If you received any payments they will need to be reported as income in your tax return. Services Australia can confirm the amount you received. When completing your tax return the ATO says you should enter the amount you received in the ‘Australian Government special payments’ section if you lodge online using myTax or ‘Question 24 Other income’ if you lodge by paper.
It’s important to note that this is different from the COVID-19 Disaster Payment which provided support to those who were unable to earn income because state or territory health orders prevented them from working in their usual employment. This is considered non-assessable non-exempt (NANE) income which means it is a non-taxable payment and does not need to be included in your tax return.
4. The $1,080 tax offset is back
Good news – the $1,080 Low to Middle Income Tax Offset, which was set to be scrapped, was extended for yet another year. But, it’s important to note you may not get the full $1,080 back as a refund. According to the ATO, the offset is worth anywhere from $255 up to $1,080 depending on how much you earned – and it only applies if your annual income is below $126,000.
Offsets only reduce the amount of tax you pay. So, if your tax is knocked down to zero, you won’t get paid any remaining offset as a tax refund. You don’t have to do anything to claim the $1,080 offset. The ATO will automatically work it out when you lodge your tax return.
5. Claiming for work-related car expenses and COVID-19
COVID-19 lockdowns have seen Australians driving a lot less. So, if you use a car for work, and you rely on a logbook to sort work-related travel from private use, you may be unsure if you need to keep a new car logbook.
According to the ATO, you aren’t required to keep a new logbook for the period in which your travel has been affected by COVID-19 but you may want to keep a new one if you think it will provide a more accurate indication of your business use of the car. “However if your overall business usage has not changed and you are merely using the car less, the odometer readings will reflect this and you will not need to keep another logbook,” says the ATO.
6. Take care if you’re a first-time share or ETF investor
A record number of investors entered the sharemarket for the first time in the 2020-2021 financial year. “Unfortunately, first-time investors often don’t understand their taxation obligations, don’t keep appropriate records and are more likely to make mistakes when lodging their tax returns,” said ATO Assistant Commissioner, Tim Loh.
Information about dividend payments and the purchase and sale of shares may automatically be added to your tax return but Mr Loh warned that it is still important for investors to check that all their relevant data has been included.
One of the areas the ATO has flagged is the importance of declaring any dividends or distributions as income – even if they are automatically reinvested into a reinvestment plan.
It is also important to note that capital losses only happen on the sale of the share says the ATO. “Investors cannot claim ‘paper losses’ on investments if the share price drops but they continue to own the share,” explains the ATO.
Plus, investors need to be aware that capital losses can only be offset against capital gains and not other types of income.
Good record-keeping is another must. The ATO says you should keep records of the following:
- The date of purchase/reinvestment.
- The purchase amount/value.
- Details of any non-assessable payments to you.
- The date and amount of any calls (if shares were partly paid).
- The date of sale and sale price (if you sell them).
- Any brokerage costs or commissions paid to brokers when you buy or sell.
- Details of events such as share splits, share consolidations, returns of capital, takeovers, mergers, demergers and bonus share issues.
- Details of capital losses made in previous years – you may be able to offset these losses against future capital gains.
- Dividend or managed investment distribution statements (Standard Distribution Statements).
If you are new to investing getting professional advice on the tax considerations can be a good idea.
7. Property investors and reduced or deferred rent
If you own an investment property and negotiated reduced or deferred rent (at arm’s length), you only need to declare the rent you have received as income. “Back payments for deferred rent or insurance for lost rent should be declared as income in the financial year in which you receive the amounts,” explains the ATO.
Even if you reduced the rent, you can still claim normal expenses made on your property – as long as the reduced rent is determined at arm’s length and considers current market conditions, added the ATO.
The same applies for expenses on short-term rental properties where demand may have been affected by COVID-19.” Generally, if your plans to rent a property in 2020–21 were the same as previous years, but were disrupted by COVID-19, you will still be able to claim the same proportion of expenses,” says the ATO.
“This only applies where the property was not used privately. If you, your family or friends stayed at the property for free or at a reduced rate, you won’t be able to claim or will only be able to claim a portion of these expenses.”
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