Personal Income Tax Update

Preparing your tax return: July 2020

For many the start of a new financial year, marks the commencement of gathering various receipts and files from the last 12 months to prepare for lodging a tax return. While it can be an arduous task at times, this year’s preparation is likely to be a little different given COVID and many of us having found ourselves working from home for an extended period of time.

To make the process a little easier, we have collated several points that may be useful in preparing your tax return.

 

Working from home

For those of us who have been working from home due to the pandemic-response requirements, the Federal Government has put special arrangements in place to make it easier for individuals to claim expenses they have incurred and are not reimbursed by their employer. Rather than itemising individual costs for expenses such as electricity and internet, claims can now be made at a rate of 80 cents for each hour you worked at home between 1 March 2020 and 30 June 2020.

To use this method, you will need a record of the hours you have worked, such as a diary or timesheet.

The claim covers all your additional running expenses such as:

  • Electricity and gas
  • Decline in value and repair of capital items such as office furniture
  • Cleaning expenses
  • Phone and internet expenses
  • Stationery
  • Decline in value of computers and devices.

The COVID-hourly rate of 80 cents can be claimed per individual and is not limited by household. That is, if you have multiple people working from home in your household, each person can claim the 80 cents per hour rate for the hours they have worked from home.

Using the COVID-hourly rate is optional and aimed at people who do not normally work from home. For some, their expenses will be higher, such as those with a dedicated home office, or for those that normally operate their business from home. In these circumstances, and for work conducted before 1 March 2020 the normal rules and deductions methods will apply.

If you have questions around this claim method please contact our team.

 

Investment properties

If the pandemic has impacted commercial or residential premises you own and rent out, from a tax perspective there are only minor changes. These are:

  • If tenants remain in the property or the property remains genuinely available for rent, you can continue to claim expenses as usual, even if the rental rate has been reduced on a temporary basis or tenants have been unable to pay rent for a period of time.
  • If you negotiated with your bank to defer mortgage repayments, you can continue to claim interest as the deferred interest is capitalised.
  • If you received an insurance payment for rent defaults, or your tenant made a back payment of rent they owe, this income is taxable and will need to be declared in your tax return.
  • If you negotiated with your bank to defer mortgage repayments, you can continue to claim interest as the deferred interest is capitalised.
  • If you received an insurance payment for rent defaults, or your tenant made a back payment of rent they owe, this income is taxable and will need to be declared in your tax return.

JobKeeper and your tax return

Both the JobKeeper wage subsidy and JobSeeker payments are defined as taxable income and will need to be reported to the ATO.

For those receiving JobKeeper, your employer should have already noted those payments on their PAYG summary, while anyone on JobSeeker can expect to receive an income statement from Centrelink outlining how much has been received, which needs to be lodged when completing a tax return.

For those sole traders and company directors receiving JobKeeper payments, you are required to include these payments as business income in your individual tax return.

 

myGov and PAYG

The ATO continues to move towards online services and while helpful in regard to having all your information in one place, it has meant that personal PAYG and quarterly instalment notices are now issued to myGov accounts and not directly to your accounting team.

Given this change in process, accounting teams are not advised of any PAYG requirements until they are overdue, as such it is essential that individuals (including if you’re a sole trader) regularly check their myGov inbox to ensure no outstanding tax obligations.

To check if you’ve any obligations please log into your myGov profile, and access the ATO section under ‘My Services’. If an installment or lodgement of the PAYG statement is due, a banner will appear at the top of the screen.

Alternatively, you review your position by selecting the ‘Tax’ dropdown menu, select ‘Activity Statements’ and ‘Lodge Activity Statement’.

An easy ‘How to’ video can be viewed here.

By regularly checking your myGov account you can ensure your PAYG installations are up to date.

As always the q4 team is here to help, and if your tax circumstance is a little different this year we encourage you to reach out to discuss how we can assist.

 

Kind Regards,

Grant Titman and Kelly Hill
Directors

q4 financial