How to prepare your 2019/2020 tax return.
There are updates to working from home tax deductions and there are other tax changes for individuals and businesses. Here’s how to prepare your tax return.
The global impact of the COVID-19 pandemic has changed many aspects of business life this year. Your tax planning will be different, too.
In your 2019/2020 tax return there could be JobKeeper and JobSeeker payments to declare, new working-from-home deductions to claim, and business Cashflow Boosts to disclose.
A tax professional can help you claim your maximum deduction. But here is a guide to the tax return changes you need to know this year.
Work from home tax deductions
When the COVID-19 restrictions were in place around the country in April and May 2020, an estimated one in three Australian workers was working from home.
This means more than four million Australian employees may be eligible to claim the new method of calculating a work-from-home deduction.
This year the Australian Taxation Office (ATO) introduced a new flat rate of 80 cents per hour of work-from-home time to account for home-office costs.
The ‘shortcut’ method
Qubik Senior Accountant Kitty Smith says employees can claim the 80 cent per hour rate if they worked from home between March 1 and June 30.
She says this “shortcut method” includes home-office costs and depreciation as well as other internet, phone and stationery charges. These other costs were previously not included in the work-from-home rate.
“What’s great about that is that you don’t then have to go and get your phone bill and your internet bill and work out what was for work and what was personal use,” she says.
“You can easily claim the costs of working from home using that single rate. It’s all included.”
She says it is worth keeping a calendar or journal of your work-from-home days to keep an accurate record for your tax records, especially for the 2020/2021 tax year to come.
Claiming other work-related expenses
But Ms Smith warns it is worth taking the time to check if this shortcut method – which works out to $30.40 for a standard 38-hour working week – will give you the best possible refund.
“Some people go and get their electricity bills and cleaning bills and collate everything and total it all up and work out their business use to find out what is the best outcome,” she says.
“Use whichever one works out best for you.”
Another way for employees is to claim 52 cents per hour of work-from-home time and then claim extra deductions for anything you bought.
You can claim work-related expenses of less than $300 as an immediate deduction, while those priced at more than $300 have to be depreciated over time.
“You can use a combination of the methods and you can change it each year,” she says.
Rental property tax claims
What’s new for the ATO in 2020 also introduces changes for tax on rental properties.
You can claim deductions if your tenants can’t pay their rent, or if they are paying a lower rent, and you still have expenses for the property.
Ms Smith says there must be a lease agreement in place, or you have to be marketing the house or unit for rent, in order to claim the rental property tax deductions.
COVID-19 tax changes for businesses
It is critical to make sure your business accounting is accurate and up-to-date as the ATO has flagged that compliance is firmly on their radar.
JobKeeper payments to employees should have flowed from the ATO to businesses to employees already, ahead of new changes to eligibility from the end of September.
Ms Smith says the payments of $1500 per employee per fortnight in the last financial year will need to be included on business tax returns as other revenue.
“That income should be classified as assessable income but there is no impact on GST,” she says.
The most common problem she is seeing at the moment, she says, is incorrect accounting for the new government payments.
The Australian Government’s 2019/2020 temporary cash flow boost scheme – which provided small-to-medium companies a rebate of between $20,000 and $100,000 for employee tax in the March and June quarters – should be accounted for as non-assessable, non-exempt income.
When to lodge your 2020 tax returns
If you’re doing your own individual tax return for 2019/2020, you need to get it into the ATO and pay any outstanding liabilities by October 31.
Ms Smith says most of her clients at the moment are receiving refunds, sometimes because they have prepaid their tax or student loans at a certain rate and their income was lower.
When people have registered tax agents to help them prepare their tax returns, the ATO grants them more time.
Trusts, Partnerships and Individuals using an accountant will be able to lodge their 2019/2020 tax return by May 15 next year. Company tax returns are generally due on May 15 however large and medium businesses (turnover exceeding $10m) will be due for payment and lodgement earlier. We recommend checking with your tax agent to ensure you lodge your tax return on time.
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