Top tips for a lodging tax return: COVID-19 brings changes.
Only a few days remain in the tax year to take advantage of new personal and business benefits aimed at helping taxpayers get through a difficult year defined by COVID-19, bushfires, and financial instability.
The Australian Taxation Office, on the other hand, says it is focused on pandemic and other tax schemes by utilizing expanded payroll access, superfund data, and even phoning companies to double-check employment claims.
The ACCC recognizes that many businesses are having difficulty managing product and service cancellations, delays, and suspensions.
As a first step, we recommend that firms contact consumers as soon as possible to inform them of how they are managing certain situations. Businesses should continue to be aware of their responsibilities under the Australian Consumer Law, which include:
- not to mislead consumers, especially regarding their rights under their terms and conditions; not to act unconscionably when dealing with customers; and not to depend on unfair provisions in standard form contracts with customers.
- The Consumer section contains information on consumers’ rights in regard to goods and services. Small firms are frequently referred to as customers, especially when interacting with major corporations.
Have you missed the deadline for filing your tax return? You’re not alone: every year, a large percentage of Australians fail the October 31 deadline.
If you’re a year or many years behind plan, don’t worry. You can do a few things to appease the ATO, but don’t waste your time. The longer you wait, the higher the penalty, which might be hundreds of dollars.
Having trouble keeping up with your bookkeeping? We’re here to assist you. Bookkept is a team of trained accountants and business consultants that can handle all of your accounting and consulting needs so you can focus on what you do best: operating your business.
For a consultation, call (03) 8568 3606 or email [email protected] immediately!
Home-based employment and COVID
Depending on their conditions, some companies and people may continue to work from home. This article provides general advice to help firms and people manage health and safety hazards when working from home.
Working from home is a viable option depending on the employer and the resources available for working remotely and securely from home.
The ATO has made working from home claims simple this year, which is great news for folks who aren’t tax experts.” During the coronavirus epidemic, the ATO has adopted a temporary shortcut technique’ of calculating additional running expenses, allowing people working from home to claim a rate of 80 cents per work hour.
This quick approach is valid from March 1, 2020, until June 30, 2020.
So, what are the requirements for making this claim? It’s a straightforward procedure.
Do you need help with your bookkeeping? Bookkept is a trusted accounting and bookkeeping company in Australia. We perform cheap and quick tax returns for individuals. You can give us a call on (03) 8568 3606 or email us on [email protected].
“As a result of COVID-19, you’ll need to keep track of how many hours you worked from home in a diary or timesheet.
“You can’t make any additional claims about working from home if you adopt the 80 cents per hour strategy.”
Regular flat rate for home-based labour
The tax break that made declaring work-from-home costs easier is about to expire, but there are mounting requests to keep the standard in place.
People may claim a fixed rate of 80 cents per hour working from home under the temporary COVID-19 deduction shortcut, which covered all extra expenditures including internet and power.
The deduction, though, is due to expire this fiscal year.
This implies that, unlike the ATO’s current flat-rate allowance for working from home, this rate covers both mobile phone and internet usage.
Although this rate is fixed at 52 cents per hour, it only covers the additional expenditures of heating, cooling, lighting, and furniture depreciation.
All you need is a notepad with the start time, finish time, and any breaks to claim the 52 cents per hour.
This rate differs from the temporary 80 cent rate since you may claim the job-related share of things like your home internet, mobile phone bills, and other costs that directly pertain to your business, such as stationery and printer ink.
Claiming the true expenses
People can also claim actual expenses incurred when working from home.
Keep all of the original bills that you paid with for this transaction.
“You can then compute the portion of your home costs that is tied to work, and you can apply that percentage to the actual amount that you spend on things like your electricity bill, gas bill, water bill, phone bill, and internet bill, among other things.” You will still be responsible for keeping track of the number of hours that you spend working from home and determining the proportion of your home that is dedicated to serving as a workspace (by floor area).
Expenses related to cleaning, depreciation of home office furniture and fittings, and repair costs for home office equipment, furniture, and furnishings are all examples of things that could potentially be claimed here.
If it costs less than $300 to purchase a small capital asset, such as furniture or computer equipment, the full purchase price can be immediately written off as a tax deduction. (no depreciation necessary).
He further emphasised that although while this would typically result in a bigger claim than flat rates, the paperwork and computations would be far more onerous if they were done this way.
If they decide to go in this direction, they should consult a tax professional before making any decisions.
Remember that both JobKeeper and JobSeeker are taxable payments that must be reported on your tax return.
“Payments from JobKeeper are processed in the same manner as your regular salary or earnings from your employer, and they are reflected in your income statement,” JobKeeper says.
Your JobSeeker payments will be automatically included in the component of your tax return that pertains to allowances and payments from the Australian government around the beginning of July.”
If you want to lodge your return before Services Australia provides this information to the ATO, you can provide the details of your JobSeeker payments to your tax agent, and they will complete the portion that is pertinent to your situation.”
The modifications to payment summaries in 2020 tax returns are also worth noting.
This year, employees will not be getting one from their place of employment.
“If you work for a major firm like Qantas or Coles, you’ll be aware of the change that saw you receive a ‘income statement’ from the ATO rather than a tax return last year,” he continued. “This is something that you’ll be aware of because it occurred.”
“Beginning this year, no matter how big or little your company is, all of the employees will be subject to the same system.” Advice for Completing Your Overdue Tax Return
Be assured that you do not need to be concerned if you get a letter from the ATO.
If you wait too long to file your return, you may receive a letter from the ATO that says “default assessment.” It will often include an estimate of your income as well as the taxes you owe.
Don’t be alarmed. These are sent to everyone by the ATO and are intended to get you started.
Calculate how many you’ll need to lodge.
If you are behind by one year, it will be far easier to manage and explain than if you have a history of missing lodgements. Determine how many years you missed and whether you must file a tax return for those years.
You must submit if you earned less than the tax-free amount for the year. This year’s limit is $18,200, however, it was formerly lower.
Talk to an accountant or tax agent.
Do not attempt to do this task on your own. It’s not as straightforward as utilizing MyTax to file a late tax return (the MyGov lodging system). Make an appointment with an ATO-certified expert. They will not only be aware of deductions and other concessions that may raise a return, but they will also be able to negotiate with the ATO to lessen any fines that may be imposed.
Yes, it will set you back some cash. It’s worth it, though, because the ATO may find your thousands if you don’t.
You should probably call the ATO.
If you’ve missed numerous years, it could be worth contacting the ATO to let them know you’re on top of things. Even if you sign that things are in the works, you’ll be well on your way to gaining the ATO’s favour if you are proactive about following the law.
Assemble all of your documentation
You’ll need pay stubs from each job you held during the years your tax returns were late to get started. Employers are required by law to offer these to you.
If you don’t have them, you’ll need to contact them and ask for a replacement. If you are unable to obtain copies, your accountant or tax counsellor can assist you in determining your earnings.
Then you’ll need to locate purchase documents that can be used to reduce your tax burden. In theory, you can deduct any costs linked to your job that is not paid by your employer and are related to the job at hand, but there are some criteria and regulations to follow.
Even if you don’t have receipts, you can deduct up to $300 worth of expenses. However, in all seriousness, you shouldn’t lie because the ATO can interrogate you about such transactions even if you don’t have any proof. If they accuse you of lying or if your deductions are different from those of others working in your profession, they will view you with a level of mistrust.
Don’t go crazy
Really! Don’t be concerned. It’s likely that you’ll be entitled to a significant return at the end of it all. Simply remember that the more you stay on top of your taxes now, the easier it will be in the future.
Savvy people are saving their refund wisely.
According to the Australian Tax Office, the average tax return in Australia is above $2,000*. According to Heritage’s Head of Wealth Management, Richard Herbst, most consumers regard their tax return money as a windfall. “There are various really intelligent methods to use your tax refund money depending on your position. Any personal debt may be reduced or saved using the obvious techniques.”
Reduce your home loan
A one-time $2,000 lump-sum payment on a $300,000 loan at 5.19 percent pa might save you nearly $4,000 in interest over the life of your loan (without accounting for any fees associated with lump-sum payments) and bring your loan term to an end three months sooner1.
Pay off your credit card.
The average credit card debt in Australia is $4,700. Put your return on your credit card if you want to pay off your credit card debt. If you had a $4,700 credit card debt, you could save almost $2500 in interest and pay off your debt 14 years faster than if you only made the minimum payments.
If you choose to save your $2,000 tax return each year in high-interest savings accounts like our Online Saver, your yearly tax refund could grow to more than $26,000 in only 10 years3. That money may go towards a new automobile, a fantastic abroad vacation, or home improvements!
Go shopping and find some bargains.
Let’s face it: spending your tax refund to treat yourself for all your hard work throughout the year is a terrific way to thank yourself. Remember to look around for the greatest deal on whatever you want to purchase.
- Support your local companies – local retailers are frequently price competitive, plus you have the advantage of being able to see and feel the thing you’re purchasing. You’ll also get personalized care and guidance.
- Shopping online with your Heritage Visa debit or credit card has various advantages, such as reduced prices and no restrictions based on your region. It’s a fantastic way to shop in London, New York, and Paris without having to pay for flights!
Lodge online for free with myTax
MyTax, the ATO’s free online service, is where you may file your return. To lodge online, you must have a myGov account linked to the ATO. Returns submitted through myGov are typically processed in two weeks.
MyTax makes online lodging simple. By mid-August, the majority of information from companies, banks, government agencies, and health funds will be pre-filled into your myTax. Check the information, make any necessary adjustments, and submit. After that, MyTax will compute your tax for you.
Declare all your income
The majority of your income information will be pre-filled from information provided by your employer and banking institutions to the ATO. You may need to supplement your income with additional sources.
The following are examples of income that must be declared:
- earnings from work
- government assistance
- annuities and super pensions
- revenue from investments (including interest, dividends, rent and capital gains)
- revenue generated by the sharing economy (for example Uber or Airbnb)
- Insurance and compensation payments
For additional information on the income you must report, go to the ATO’s website.
Claim your tax deductions
Some costs are eligible for tax deductions. A deduction lowers your taxable income, lowering your tax bill.
- must have paid for them yourself and not been reimbursed;
- they must be directly tied to producing your income; and you must have proof of payment.
Here’s a list of items you might be able to claim if your costs fulfill certain conditions.
Vehicle and travel expenses
You may be eligible to claim a deduction if you use your automobile for business or work in many places. This usually excludes the expense of transportation between work and home.
Clothing, laundry and dry-cleaning expenses
To be eligible for reimbursement for the purchase of a work uniform, it must be unique and distinguishable. It may, for example, bear your employer’s emblem or be tailored to your profession, such as chef’s pants or colored safety vests.
Self-education costs are deductible if the course results in a formal qualification and fits the following criteria:
- The course must be sufficiently related to your present job and either maintain or develop the specific skills or information you need in your current job, or result in, or is likely to result in, a rise in your current job’s pay.
Even if a course has a sufficient relation to your current work, you cannot claim a deduction for self-education expenditures if it:
- It might be broadly connected to it, or it could help you find new work.
You can claim course costs, student union fees, textbooks, stationery, internet, home office expenditures, professional publications, and some travel if the study is related to your present employment.
Tools and other equipment
Taking advantage of tax deductions for items purchased for work-related purposes is a terrific way to improve your refund. Claiming tools on tax may be a bit of a minefield, so having access to expert guidance when figuring out what you can and can’t claim is a smart idea.
You can deduct part or all of the cost of tools or equipment you purchase to help you generate money. If you work outside, protective clothing such as sunscreen, sunglasses, and caps are examples.
To assist you in calculating your work-related deductions, the ATO has prepared occupation and industry guidelines.
Any interest paid on loan funds used to acquire assets or securities is considered an investment interest charge. Margin interest used to leverage assets in a brokerage account and interest on a loan used to acquire property kept for investment are examples of investment interest charges.
The cost of earning interest, dividends, or other investment income may be deductible.
Some examples are:
- Interest is levied on money borrowed to invest in real estate, as well as investment journals and subscriptions.
- the amount you spent for financial advice
The Australian Taxation Office (ATO) has further information on investment income deductions.
Home office expenses
You may be eligible to claim both occupancy and operating expenditures if your house is your place of business and you have an area set aside solely for work operations. Even if you have a home office room set aside, you cannot claim occupation expenditures if you carry on your work or company elsewhere (such as an office) yet conduct some work at home on occasion.
Your computer, phone, or other electronic gadgets, as well as operating fees such as internet access, might be included. You can only deduct the percentage of your costs that are related to your job, not personal expenses.
Due to COVID-19, the ATO has provided a shortcut to make it easier to claim deductions if you work from home.
Rather of calculating prices for individual operating charges, you may now claim an hourly rate of 80 cents for all of your running expenses. This is valid from March 1, 2020, until June 30, 2020.
This new pricing is available to several persons living in the same residence. To claim, you no longer need to have a separate work from home space.
The ATO gives further details on the alternative techniques you can use to compute COVID-19 working from home expenditures.
You can also claim
- union fees
- the expense of handling your tax affairs
- income protection insurance (if you don’t get it via super).
- personal contributions to superannuation
- gifts and donations to deductible gift recipients that have been approved by the ATO
Keep receipts for tax deductions to make filing your return easier. Work-related costs, gifts and contributions, interest and profits can all be recorded using myDeductions. It also allows you to photograph receipts and keep track of automobile excursions.
A certified tax agent can assist you.
If you want to hire someone to help you with your taxes, be sure they are a licensed tax agent. You may check the tax practitioner registration to see if the accountant or agent is registered.
Most registered agents have extended lodgement deadlines and can file taxes for their customers until October 31.
Whatever method you use to file your tax return, keep in mind that you are solely accountable for the claims you make. So, before you or your agent file your return, double-check your deductions and make sure you include all of your income.
Whether it’s a new pair of shoes, watching your account balance grow or slashing your personal debt, we hope you make great use of your tax refund. If you’d like more information about using your tax refund to help reduce your personal debt – or saving it – talk to us today. We can even make an appointment with one of our financial planners for you, and your first consultation is free.