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Your guide to 2020 tax

19/06/2020

Some key changes individuals and businesses need to be aware of.

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End of financial year (EOFY) is looming, and it’s not going to be business as usual in 2020. Quite the contrary, as the bushfires and Covid-19 have affected the financial circumstances of millions of individuals and businesses this year. The Australian Tax Office (ATO) is tweaking things to reflect that in refunds and deductions.

So what are some of the changes, and how might they impact your tax return? The ATO has released this handy guide, but we’re going to break down some of the changes for you below as well.

For individuals

If you applied to the ATO and accessed your super under the Covid-19 concessions the amounts released are tax-free and don’t need to be declared in your tax return.

The income section of your tax return should include... all salary and wages payments, any redundancy payments, stand-down payments, Centrelink payments, business income and bank interest. You should also include any income protection payments you received, sickness payments or accident payments.

JobKeeper and JobSeeker payments If you’ve accessed either of these government payments during the pandemic, this should be included in your tax return as well. Employers will file this information direct to the ATO so it’ll be automatically pre-filled to your tax return.

Protective equipment If you’ve had to buy protective equipment in order to do your job – such as gloves, face masks or hand sanitiser – and you haven’t been reimbursed by your employer, you may be able to claim these as a deduction.

Working from home expenses

Given that we’re coming out of lockdown now and the fact that many of us worked remotely for a time, the ATO is expecting to see a lot more people claiming deductions related to that. And there are several ways you can go about it:

  1. The shortcut method This enables you to claim 80c per hour for every hour you worked from home between March 1 and June 30, 2020. You’ll need diary entries or a time-sheet as proof of this. 
  2. The fixed rate method If you use this method, you’re able to claim 52c per work hour for items such as heating, cooling and lighting. You can also calculate the work-related portion of your phone and internet expenses, computer accessories and the decline in the value of your computer, laptop or other device. 
  3. The actual expenses method You can claim the actual work-related portion of all your running expenses using the ATO accepted calculation methods on their website.

What you can’t claim

If you’ve worked from home during Covid but needed to travel to the office one day a week that is likely to fall under ‘private travel’ and would not be claimable. Similarly, if you haven’t travelled for work or needed to wear your work uniform, you can’t claim travel or laundry expenses.

The three rules of claiming anything:

  1. You must have spent the money out of your own pocket and not had it reimbursed 
  2.  The expense must relate directly to your income
  3. You must have a receipt or other record to prove the purchase.

Changes specific to businesses

JobKeeper subsidies This wage subsidy of $1500 (before tax) per fortnight for each eligible employee was put in place to help you retain and pay staff during the pandemic. The subsidy is taxable to businesses but you can claim it as a deduction when it’s paid to your employees, so there’ll be no net tax effect. There’s more information and instructions here if you’re an employer reporting through Single Touch Payroll.

Instant write-offs The ATO has bumped up this initiative significantly to help small businesses out. If you’re a business with an aggregated turnover of less than $500m, you may be eligible for increased instant asset write-offs. The threshold was raised from $30,000 to $150,000 on new or second hand assets you first used or had installed ready for use from 12 March to 30 June 2020. These instant asset write-offs have recently been extended to 31 December 2020.

Cash flow boosts If you’re a small business with a turnover of less than $50m, you may have received a cash flow boost via credits in the activity statement system – an initiative by the ATO to support small businesses to retain employees. These boosts are tax free and not required to be paid back.

This list just touches on a few changes occurring due to Covid-19, and there may be other 2020 tax concessions and changes that relate to you as an individual, or to your business. Always check with your tax agent or accountant about what might relate to your specific circumstances and remember that individual tax returns are due before 31 October 2020 if you’re planning to lodge your own.

Newcastle Permanent Building Society does not provide tax or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax or accounting advice. You should consult your own tax or accounting advisors to consider whether it is appropriate for your circumstances. Information in this article is current as at the date of publication.

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