16 Jun 2020

We have asked CPA Matt Hodges from Boost Accounting and Advisory to give us some insight as to how our tax returns will be affected by COVID and what we need to be aware of when compiling them this end of financial year.

Here is what Matt wants you to know as you start preparing for tax time.

With the global upheaval, preparing for the lodgement of your 2020 tax return might be the furthest thing from your mind at the moment, but if done right it can save you money at tax time. Along with usual deductions available, the ATO has provided a number of well publicised concessions for businesses like the Job Keeper program and Cash Boost subsidy, but what is available to individual taxpayers?

The main Covid-19 related concession afforded to individuals is the new 80 cents per hour rate claim for employees required to work from home between 1 March and 30 June 2020. The only substantiation required for the claim is documented hours of work carried out from home.

Whilst on the surface, it sounds like a win for taxpayers, it is important to understand whether you will actually be better off before applying this to your circumstances.

In previous years, and up to 1 March of the 2020 financial year, the ATO has provided mechanisms to claim tax deductions for expenses incurred in working from home. The two existing methods (which remain in place today), are the 52 cents per work hour rate to cover heating, cooling, lighting, cleaning and office furniture depreciation and the second method is claiming the actual work related portion of your running expenses based on a reasonable apportionment basis. This is typically done by comparing the floor space of a dedicated home office relative to whole home floor space, and applying that percentage to your expenses. On top of the 52 cents per hour rate, you are then able to add on the work related portion of your telephone, internet, computer costs, stationery and equipment depreciation.

The key difference to note with utilising the new 80 cents per hour rate is that you can no longer add on those additional expenses to your claims. Meaning, if you typically claim a high work related percentage of your home internet and/or telephone, or have an asset you are depreciating, you may well be better off continuing to claim using the existing methods available. Whereas, if you have never previously made these claims, the 80 cent per hour rate may well be an effective deduction to utilise.

Remember, the new rate only applies from 1 March 2020, so all deductions prior to this are to be claimed in line with the pre-existing deductibility requirements. So before you assume the new rate is the way to go, compare your expenses to ensure it will be the best tax outcome for you.

On a more general note, when compiling your work related deductions, in order to claim them for tax purposes, you will need to ensure that you have incurred them yourself without being reimbursed, they must be incurred in relation to deriving your income and you must have the records to substantiate the claim.

If you would like to get in touch with Matt to help guide you through the impending tax time, let us know. And if you have any mortgage related queries this end of financial year contact your Blackburne Mortgage Broking team.

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