By: Leah Callaghan, June 2020
For most, the 2019/2020 financial year has been tough. Incomes and spending have been impacted by drought, fires and the COVID-19 pandemic, prompting the Australian Tax Office (ATO) to introduce new claim and support options. Some old offsets have also made a comeback.
State Custodians caught up with tax experts Mark Chapman, Director of Tax Communications at H&R Block and Amanda Egan, Partner at Essentia Partners, to find out everything you need to know to maximise your return this financial year.
Initiatives introduced to support taxpayers in the wake of COVID-19
- The 2019/2020 financial year has been a year like no other, with many citizens experiencing financial hardship or having their normal way of life interrupted. In response, the ATO has introduced new measures to support taxpayers.
- For individuals, key support initiatives include:
Working from home deductions
- When you work from home, it will be no surprise that running costs such as electricity, water and general wear and tear on your home will increase. Which is why you can claim a deduction on these expenses.
- There are already two ways in which you can claim working from home deductions. Those who are home office veterans will know of the flat rate of 52 cents per hour, in which you can claim additional items like phone or internet usage, or the method in which you claim a deduction on actual costs incurred, which involves keeping more paperwork and additional calculations.
- Knowing that capturing this detailed paper trail may be difficult for some remote workers, the ATO has introduced a third option, the shortcut method for those working from home. This option allows taxpayers to claim a deduction of 80 cents for every hour worked from home due to COVID-19.
- However, according to Mark, there are some stipulations that come with using this method.
- If you use the 80 cents per hour method, you can make no other claims in relation to working from home. So, items like mobile phone and internet usage are already included in the rate of 80 cents per hour," says Mark.
- Deciding on the method that is best suited to you will come down to comparing the calculations, Amanda Egan explains.
- Keeping in mind that the shortcut method is only applicable for three months, if you work from home longer than that, you may want to consider the other methods," says Amanda.
- Amanda suggests preparing all the required paperwork and going to your tax agent who can compare the methods for you and decide what would get you the best return.
- Regardless of what method you use, you will need to keep records of your time spent working from home. For the full list of what is or isn’t included as well a comprehensive look into the ways to calculate your working from home deductions, have a look at the ATOs working from home during COVID-19 page.
Early release of superannuation
- If you were eligible to access your super and did so, the good news is that this release of superannuation is not taxable and doesn’t need to be included in your return.
- Be sure to chat to your accountant to find out more and visit the ATO website here.
Reducing superannuation minimum drawdown rates
- Many retirees depend on their superannuation for income. The pandemic caused a significant loss to the economy, forcing many retirees to consider selling assets in order to afford the required drawdown amount.
- In order to keep the value in their superannuation, the Government has temporarily reduced the minimum drawdown requirements for account-based pensions by 50 per cent. This will allow many retirees to hold onto their investment assets in an unstable economy, instead of having to sell them in order to fund the previous drawdown minimum.
- Pension payments are not taxable for those over the age of 60, and from ages 55 to 59 years are taxed at a marginal tax rate, less a 15 per cent tax offset.
Initiatives that have returned in 2019-2020
- Last year, Prime Minister Scott Morrison introduced a new tax offset, seeing an increased amount of up to $1,080.00 for low to middle income earners.
- The good news is that the incentive has returned this year and you don’t need to do anything to receive it. The Government automatically calculates if this offset applies to you.
Tax and the JobSeeker and JobKeeper initiatives
- If you were are one of the millions of Australians whose employment has been impacted by the pandemic and are receiving either JobKeeper or JobSeeker payments, this financial support will form part of your taxable income at tax time.
- Your employer will be paying the tax that you owe from JobKeeper on your behalf each pay cycle, and Centrelink will deduct the tax on the JobSeeker, should it apply to you. So, when it comes to do your return, all the information will be available as pre-filled data.
What options are available to taxpayers who receive a bill instead of a refund?
- First of all, don’t panic. If you can’t pay the amount of tax you owe, reach out to the ATO as soon as possible. They can often set up a payment plan or defer the due date depending on your situation." says Mark.
- As you come to prepare your tax, make sure you speak to your tax accountant to find out what incentives, offsets and legislation is available to you. You can also visit the ATO website for more tips and things to note for the 2019/2020 tax return.
The opinions expressed in this article are the opinions of the author(s) and not necessarily those of State Custodians. The above is general commentary only and is not advice tailored to any individual’s financial situation. We recommend seeking advice from an insurance or finance professional before implementing changes relating to your finances.