Understanding the Australian tax system is hard enough at the best of times, but it’s even more difficult if you’ve only been living in the country for a year or so as a visa holder.
If you’ve had your hours reduced recently due to the Covid-19 crisis, or lost your job entirely, the only silver-lining is that you might benefit from a larger than normal tax return because your tax for the financial year may have been over-deducted once your new circumstances are taken into account.
When it comes to lodging your 2020 tax return, it’s definitely worth taking your time, gathering your evidence up, spending some time on the Australian Tax Office’s (ATO’s) website and making sure you don’t miss out any of your entitlements.
Working from home
The Coronavirus pandemic has led to millions of people working from home who wouldn’t ordinarily.
People who normally work from home are used to claiming deductions for home office expenses, but for millions of others, this is an alien concept.
According to the ATO, some of the things you might be able to claim for are stationary, printer ink, paper and cleaning products.
If being asked to work from home took you by surprise and you had to rush out and buy a desk, lamp and office chair at your own expense, then you could be eligible to claim deductions for those.
Working from home might be convenient, but it’s not cheap. Don’t be surprised if your next electricity bill is off the scale. Remember that ten hours a day when you used to be out of the house? Well, now you’re at home, blasting your own aircon, heating lunch in your own microwave and using your own Nespresso pods. The novelty of it all will probably wear off quickly. The only way to make yourself feel better is to claim every last cent you’re entitled to.
The following test is generally applied to working from home deductions:
– You must have spent the money. If your boss bought you a new desk and chair, or reimbursed you for your out-of-pocket electricity expenses, you can’t make a claim too. No double-dipping. If you’ve been granted an allowance by your employer to cover some of your at-home expenses, you must include this as a form of income in your tax return.
– The expense you’re claiming for must relate to earning an income. No, you probably can’t claim for an expensive piece of artwork for your study.
– You must be able to prove that you spent the money. Keep your receipts somewhere safe. It’s advisable to scan or photograph them as they fade quickly.
1. For people who are only working at home due to the Covid-19 pandemic, a temporary shortcut method of calculating running expenses has been introduced. This can be used to cover costs from 1 March 2020 to 30 June 2020. It may be extended further, depending on how quickly the majority of people return to their regular workplaces. If you’re using this method, you can claim 80 cents per hour for all of your additional running expenses. Under this method, it doesn’t matter if there are multiple people working from home; each individual is entitled to make a claim.
2. Under the fixed rate method, you can claim a flat rate of 52 cents per hour to cover the cost of heating, cooling, lighting and cleaning for your home working space. This also takes into account the depreciation in the value of your office furniture. You may also submit a claim to cover the work-related portion of your phone and internet bill and consumables such as stationary. Additionally, the ATO says that under this method, you can claim the work-related portion of the decline in value of your PC, laptop and other devices used in the course of your employment.
3. If you’re using the ATO’s actual cost method, you can claim the work-related portion of all your home working running expenses. This is obviously a more time-consuming way to process your claim but, depending on your circumstances, you might find it preferable.
Obviously not everyone has a dedicated office space to work from. Maybe you’re working from your bedroom or the corner of your dining room table. The ATO has a handy table setting out what you can claim if you work at home and have a dedicated space vs. what you’re entitled to claim if you work from home and have a dedicated space in which to carry out your duties.
The ATO website states that if you use the shortcut method, you’ll only need to keep track of the hours you work from home. If you use either of the other two methods, you must keep accurate records of hours worked and keep receipts for expenses.
If you’re using the Covid-19 shortcut method is that all expenses are already built into the 80 cents figure, such as internet costs, cleaning expenses and phone costs.
“If you use the shortcut method to claim a deduction for your additional running expenses, you cannot claim a further deduction for any of the expenses listed above,” the ATO says.
“You must keep a record of the number of hours you have worked from home as a result of COVID-19. Examples are timesheets, diary notes or rosters.”
If you intend to use the shortcut method to claim a deduction and lodge your return through myGov or a tax agent, you’ll need to add the reference note ‘COVID-hourly rate’.
Don’t forget the Morrison Government’s tax offset. There was a great deal of talk about it last year, but Covid-19 has been hogging the headlines of late.
The $1,080 offset also applies to the 2019-20 financial year. Remember, though, it’s not payable as a lump sum and not everyone qualifies for the whole amount. It’s an offset which will do one of two things: reduce your tax bill or help you bag a larger refund.
Unfortunately, you won’t benefit from it if you make more than $126,000. For people earning less than this, it’s worth anywhere from $255 to $1,080, depending on your circumstances.
We hope this was useful. Everything contained here can be found on the ATO’s website. If you need financial advice in relation to your own individual circumstances, seek out a registered practitioner.