If there is one thing Australians have been getting better at, it is filling in their tax returns early.
With the roll out of the federal government’s low and middle-income tax offset in 2019, there was a massive spike in Australians lodging their returns early to get their hands on their refunds.
This year that spike might even get higher, with the COVID-19 pandemic leaving millions of workers scrambling for any cash they can find.
The $1080 low and middle-income offset for those earning less than $126,000 could be one source of that elusive cash, although it is important to remember that it is an offset rather than a cash rebate so the amount you end up with depends entirely on individual circumstances.
It may be the base amount of $255 for the year or the full $1080, it really depends on how much tax you have already paid.
If you normally get a refund, it could be bigger because of the offset or if you normally have to pay extra tax, that amount could be lower.
The pandemic could leave you with new claims
Another cause of a bigger refund this year arises from the COVID-19 crisis itself, which opens up a range of other claims that can be made.
Those who have been working from home can claim a range of deductions for home office expenses including light, power and heating, depreciation on computer and other essential equipment, and a portion of internet costs.
To cope with the expected influx of early claims, the Tax Office has come up with a “short cut” formula to work out these home office expenses which applies from 1 March 2020 to 30 June 2020.
The ATO said the method makes it easier for Australians who have incurred some form of expense for working from home as a result of COVID-19.
Those with work from home expenses can include the amount under “other work-related expenses” on their tax return and include “COVID-hourly rate” as the description, allowing them to claim 80 cents per hour worked.
That amount covers all deductible expenses and can be used by multiple people working from home in the same house.
Short cut may leave you short changed
Of course, this short cut could also leave taxpayers short changed so it is worth working out the total estimated extra costs you have incurred before simply applying the short cut method for hours worked at home.
The new short cut method is in addition to the existing fixed-rate method and actual cost method, with taxpayers able to choose the appropriate method for their circumstances.
There is a downside from working from home though, with the ATO set to cast a close eye on other work-related expenses.
Other claims could be lower
ATO assistant commissioner Karen Foat has urged taxpayers to reduce claims for work-related expenses in the last quarter of the 2019–20 year that would have been impacted by government-mandated restrictions imposed as a result of COVID-19.
“With more people working from home, working reduced hours or unfortunately not working at all, we expect to see claims for laundry expenses or travel expenses decline this year,” Ms Foat said.
“If you aren’t travelling for work, you can’t claim travel expenses. If you aren’t wearing your work uniform, you can’t claim laundry expenses.
“It’s still important to meet the three golden rules: you must have spent the money and not have been reimbursed, it must relate directly to earning your income, and you must have a record to prove it.”
There is a final trick to be careful of – particularly for those who are keen to get their tax returns in really early.
Make sure JobKeeper and JobSeeker payments are included
JobKeeper and JobSeeker payments are taxable so they need to be included so taxpayers have been urged to hold off from lodging their returns until their employers have finalised their income statements as tax-ready and the information is pre-filled in myGov.
For the 2019–20 financial year, employers with 20 or more employees will have until 14 July, 2020 to make a finalisation declaration, while employers with 19 or fewer employees will have until 31 July 2020.
“Your income statement can be accessed via myGov and the information is automatically included into your tax return by the end of July,” Ms Foat said.
Super payments not taxable but protective items could be a claim
Taxpayers who withdrew money from their superannuation will not be required to pay tax on the amount and it does not need to be included in the tax return.
Another possible claim area due to COVID-19 is expenses for protective items required for work.
“Taxpayers working in jobs that require physical contact or close proximity with customers or clients during COVID-19 measures may be able to claim a deduction for items such as gloves, face masks, sanitiser or anti-bacterial spray if they have paid for the items and not been reimbursed. This includes industries like healthcare, retail and hospitality,” Ms Foat said.