Top tips for a lodging tax return: COVID-19 brings changes.

Whether it’s lodging tax return documents or keeping a business afloat in Australia, patience has always been part of the game — though lately, it’s felt like footy in the rain: messy, unpredictable, and challenging to control. COVID-19 changed the way we worked, earned, and reported our income, and the ATO has tightened the screws with new rules around deductions, record-keeping, and government support payments.

I’ve seen firsthand how easy it is to slip up. One of my clients, a café owner in Melbourne, thought she was on top of things until she realised she’d declared a non-taxable COVID support payment by mistake. It took an amendment and a couple of weeks of back and forth before she got her refund sorted. Those sorts of errors aren’t just frustrating — they cost you time and money.

If you want a smooth run this tax season, it’s crucial to understand what’s changed and how those changes affect your lodging tax return. Let’s start with the big picture.

Understanding How Covid-19 Changed Lodging Tax Returns

COVID-19 didn’t just bring face masks and QR codes — it also brought sweeping tax updates that are still with us today. Lodging your return now requires extra care because the ATO has made it crystal clear: they’re watching for incorrect claims, especially around work-from-home deductions and government payments.

Think of it like driving down the Monash Freeway during roadworks. You can still get to your destination, but you need to slow down, follow the new signs, and be prepared for detours. Rushing or ignoring the rules could see you hit with penalties.

Key Covid-19 Tax Updates Every Australian Needs To Know

Here are the standout changes that will affect most taxpayers this year:

• End of the shortcut method: The temporary 80 cents per hour work-from-home claim is gone from 1 July 2022.
• Two new claiming methods: You must now use either the revised fixed-rate method (67c/hour) or the actual cost method.
• Tighter record-keeping: Estimates are no longer good enough. From March 2023 onwards, you need detailed logs of hours and receipts.
• Government support reporting: Some payments are taxable and must be declared, others aren’t — get this wrong and you risk overpaying or underpaying tax.
• COVID-related expenses: RATs and PPE can be deductible, but only under certain conditions.

These changes are all about compliance and accuracy. For example, a tradie in Geelong working from home on quotes part-time might prefer the fixed-rate method, while a freelance designer in Fitzroy with a dedicated office could get more back using the actual cost method. Knowing the difference matters.

Working From Home Deductions After Covid-19

The pandemic turned spare bedrooms, studies, and even kitchen tables into offices. While many Australians are back in the workplace, hybrid work has stuck around. The ATO has reshaped its approach to work-from-home (WFH) claims, and getting this wrong could cost you.

How Does The Revised Fixed-Rate Method Work?

From 1 July 2022, the shortcut method (80 cents per hour) was scrapped. It’s now replaced by the revised fixed-rate method at 67 cents per hour.

What the 67c covers:

• Electricity and gas (heating, cooling, lighting).
• Phone and internet usage.
• Stationery and computer consumables (like paper and printer ink).

What’s excluded:

• Depreciation of office equipment (laptops, desks, chairs, monitors).
• Larger purchases over $300 AUD, which must be depreciated over their effective life (e.g. laptops 3 years, desktops 4 years).

The good news: you no longer need a separate, dedicated office. Even if you’re working at the kitchen table, you can use this method.

Example – Fixed-Rate Method:
Sarah, an accountant in Carlton, works 15 hours a week from home. Over the year, she logs 600 hours. Using the fixed-rate method, she claims:
600 × $0.67 = $402 AUD.
She also bought a new laptop in July for $1,200 AUD, which she depreciates over 3 years, adding another $400 AUD to her deduction this year.

Calculating Claims Using The Actual Cost Method

For those with a proper home office setup, the actual cost method can sometimes result in bigger deductions — but it demands more paperwork.

What you can claim:

• Proportional electricity and gas bills.
• Work-related percentage of phone and internet.
• Stationery and consumables.
• Depreciation of equipment and furniture.
• Cleaning costs for a dedicated home office.

Requirements:

• You must have a separate room that’s used as a genuine office.
• All claims must be apportioned between personal and work use.

Example – Actual Cost Method:
Ben, a freelance web designer in St Kilda, has a dedicated study. His electricity bill for the year is $2,400 AUD. Based on floor space, his office makes up 10% of the home. He claims 10% of $2,400 = $240 AUD. He also claims 40% of his $1,200 AUD internet bill ($480 AUD) because that’s the share he uses for client work. Add in depreciation on his $900 AUD monitor (claimed over 3 years = $300 AUD), and his deduction is significantly higher than Sarah’s.

Real-World Example: Choosing Between Methods

Scenario	Method	Claim Result	Notes
Sarah – part-time WFH in shared space	Fixed-rate	$402 AUD + $400 AUD depreciation = $802 AUD	No dedicated office, minimal admin
Ben – full-time freelancer with a study	Actual cost	$240 AUD electricity + $480 AUD internet + $300 AUD depreciation = $1,020 AUD	Dedicated office, higher claim, more record-keeping

Checklist: Deciding Your WFH Method

1. Do you have a dedicated home office? → Consider actual cost.
2. Do you want a simple process? → Go for a fixed rate.
3. Have you purchased big-ticket items (over $300 AUD)? → Claim depreciation separately.
4. Are your utilities and internet bills high due to heavy home use? → Actual cost could pay off.

Record-Keeping: Meeting Ato’s Covid-Era Standards

The ATO has toughened its stance on documentation. In my experience, this is where many taxpayers — even careful ones — fall short. A client of mine in Richmond thought she could rely on estimates for her hours at home. When the ATO reviewed her claim, they asked for timesheets and bills. Without them, she had to amend her return and lost over $600 AUD worth of deductions.

The lesson? If you can’t prove it, you can’t claim it.

New Documentation Rules You Must Follow

The ATO introduced stricter rules starting 1 March 2023. Here’s what you need to know:

Hours Worked at Home

• 1 July 2022 – 28 February 2023: A representative record, like a 4-week diary, is acceptable.
• From 1 March 2023 onwards: You must keep a contemporaneous record of all hours worked. Timesheets, rosters, or daily diaries are valid. Estimates won’t cut it anymore.

Expenses

• Fixed-rate method (67c/hour): You must keep at least one bill or receipt for each type of expense (e.g. one electricity bill, one internet bill). This proves you actually incurred the cost.
• Actual cost method: You need every receipt and bill for each expense you’re claiming, plus a calculation showing the work-related percentage.

Tools And Tips For Staying Compliant

Keeping records doesn’t have to be a nightmare. Think of it like keeping score at a footy match — if you don’t track it, you won’t know the result.

Options for staying organised:

• Spreadsheets: A simple Excel or Google Sheet to log hours and expenses weekly.
• Digital Receipts: Many retailers now email receipts — keep them in a dedicated tax folder.
• Diary Apps: Even a phone calendar can double as a work log if updated daily.

Timeline Of Record-Keeping Changes

Period	What’s Required	Example of Proof
1 Jul 2022 – 28 Feb 2023	4-week representative diary for hours	Diary showing hours worked each week
From 1 Mar 2023 onwards	Record of all hours worked	Timesheets, rosters, and daily diary
All year (fixed-rate method)	At least one bill for each type of expense	Electricity bill, internet bill
All year (actual cost method)	All receipts + calculation of work %	Internet bill + usage diary, electricity bill + floor space calculation

Tip: If you’re ever audited, the ATO may ask for up to five years’ worth of records. Keeping everything digital saves headaches.

Avoiding Common Lodging Mistakes During COVID-19

I’ve seen plenty of Australians lose out on deductions — not because they weren’t entitled, but because they claimed them the wrong way. The ATO has made it clear: they’re keeping a close eye on COVID-related claims, and some mistakes raise red flags immediately.

Think of it like fishing in Port Phillip Bay. You might hook a big snapper, but if you’re over the bag limit or using the wrong bait, the Fisheries will fine you. The ATO works the same way — you can claim what you’re entitled to, but step outside the rules and you’ll get stung.

Claims That Raise Red Flags With The ATO

Here are the most common traps to avoid:

• Double-dipping on WFH expenses:
  If you use the 67c fixed-rate method, you can’t separately claim internet or phone bills — they’re already included. Yet many taxpayers try to sneak these in and get flagged.
• Claiming occupancy expenses when you’re not running a business:
  Employees working from home generally cannot claim rent, mortgage interest, council rates, or home insurance. These are only deductible if your home office is a genuine place of business (e.g. a GP clinic run from home).
• Overstating private use as work use:
  If you use the actual cost method, you must apportion bills. For example, claiming 100% of your internet when the whole family streams Netflix is not going to fly with the ATO.
• Claiming household items:
  Coffee, tea, toilet paper, or biscuits might be provided at the workplace, but buying them at home doesn’t make them deductible.

How To Apportion Mixed-Use Expenses Correctly?

One of the biggest sticking points is splitting personal and work use. The ATO expects reasonable and evidence-based calculations.

Example – Internet Bill

• Annual cost: $1,200 AUD
• Work use: 40% (based on a 4-week diary of actual use)
• Claimable deduction: $480 AUD

Example – Electricity Bill

• Annual cost: $2,400 AUD
• Office space: 10% of the home
• Work use: 50% of the time (shared with family)
• Claimable deduction: $2,400 × 10% × 50% = $120 AUD

Quick Checklist: Avoiding ATO Red Flags

1. Don’t double dip — choose your WFH method and stick to its rules.
2. Only claim occupancy expenses if you run a business from home.
3. Always apportion bills between personal and work use.
4. Keep diaries, timesheets, and calculations to back up claims.
5. Never claim general household groceries or items.

COVID-19 Government Payments And Your Tax Return

Government support kept a lot of Australians afloat during COVID-19, but not all payments are treated the same at tax time. I’ve seen clients either miss out on refunds because they over-declared, or end up with unexpected tax bills because they didn’t include taxable payments. The ATO has been very clear: you must know which payments are taxable and which aren’t.

Payments That Are Taxable And Must Be Declared

These payments are considered income and must appear on your tax return:

• JobKeeper Payments
  • If you were an employee, these should already be on your income statement via Single Touch Payroll.
  • If you were a sole trader, you must include JobKeeper payments in your business income.
• JobSeeker Payments
  • Treated as taxable income and reported by Services Australia.
• Pandemic Leave Disaster Payment
  • Payments of $450 AUD or $750 AUD for isolation are assessable income.
  • Must be declared under Other Income – Australian Government Special Payment.
• Disaster Recovery Allowance
  • Short-term support for lost income during disasters is taxable.

Example:
Mark, a sole trader in Bendigo, received $6,000 AUD in JobKeeper across several months. He must add this to his business income for the year, even though it felt like “support” rather than earnings.

Payments That Are Non-Taxable And Should Not Be Declared

These payments do not count as income and should not be included in your return:

• COVID-19 Disaster Payment
  • Lump sum payments for lockdowns are non-taxable.
  • Important: This was originally classified as taxable. If you declared it in 2020–21, you should amend your return — you may be due a refund.
• Economic Support Payments
  • One-off payments of $750 AUD or $250 AUD are tax-free.
• Early Access to Superannuation
  • Withdrawals of up to $10,000 AUD due to hardship are not taxable.
  • They also don’t affect Centrelink payments.
• Cost of Living Payment
  • One-off payment of $250 AUD (April 2022) is tax-free.

Example:
Anna in Geelong received a $250 AUD Cost of Living Payment and $750 AUD COVID-19 Disaster Payment. Neither needs to be reported on her tax return.

Case Study: Correcting Past COVID-19 Reporting Errors

A client of mine mistakenly declared a COVID-19 Disaster Payment as taxable income in their 2020–21 return. After realising the ATO had reclassified it as non-taxable, we lodged an amendment. The outcome? They received a $480 AUD refund within three weeks.

This is a good reminder: if you incorrectly included non-taxable payments, it’s worth checking past returns and amending them.

Claiming COVID-Related Work Expenses Beyond WFH

While most of the tax focus has been on working-from-home deductions, COVID-19 also brought new types of work expenses. Many Australians bought Rapid Antigen Tests (RATs) or personal protective equipment (PPE) to meet workplace requirements. The ATO allows some of these costs as deductions, but only under specific conditions.

Deductible Covid-19 Expenses You Might Miss

Rapid Antigen Tests (RATs):

• You can claim RATs if:
  • Your employer required you to test before work.
  • You paid for the tests yourself (and weren’t reimbursed).
  • You kept records of purchases.
• Only the work-related portion is deductible. If you bought a 5-pack for $50 AUD and used 3 for work and 2 for personal, you can claim $30 AUD.

Personal Protective Equipment (PPE):

• Items like masks, gloves, and sanitiser are deductible if:
  • They were necessary for your job (e.g. healthcare, hospitality, retail).
  • You paid for them yourself.
  • Your employer didn’t supply or reimburse you.

Example:
Sophie, a nurse in Footscray, purchased $200 AUD worth of masks and sanitiser across the year for her shifts. Her employer didn’t reimburse her, so she can claim the full $200 AUD.

Documentation Needed For COVID-Specific Claims

The ATO won’t accept a claim without proof. Keep:

• Receipts or invoices for RATs and PPE.
• Employer communications (e.g. emails or policies) requiring RATs or protective gear.
• Apportionment records if purchases were split between work and personal use.

Checklist: Proving COVID-19 Expenses

• Do you have receipts?
• Can you show that your employer required it?
• Was it for work, not personal use?
• Were you reimbursed? (If yes, you can’t claim it.)

Tip: The ATO specifically disallows claiming RATs for personal use, such as testing before family gatherings. Only employment-related testing qualifies.

Staying Compliant And Avoiding Penalties

The ATO has made it clear: post-COVID, they’re paying closer attention to tax returns. Lodging mistakes — whether accidental or deliberate — can lead to penalties, interest charges, or worse, an audit. I’ve had clients who thought a “small mistake” would fly under the radar, only to get a letter from the ATO months later asking for supporting evidence.

It’s a bit like speeding past a camera on the West Gate — you might think you’ve gotten away with it, but the fine usually arrives in the mail.

What The ATO Is Watching Closely Post-COVID

The ATO has publicly flagged the following areas:

• Over-claiming WFH deductions (especially internet and electricity).
• Incorrect reporting of government assistance (JobKeeper vs Disaster Payments).
• Failure to keep proper records (estimates and guesses no longer cut it).
• Claiming non-deductible household items like rent, groceries, and personal RATs.

Example:
A hospitality worker in Melbourne claimed $1,000 AUD in RATs without receipts. The ATO disallowed the entire claim and applied a penalty.

Action Plan For Stress-Free Lodging This Year

Here’s a step-by-step checklist to help you stay compliant and avoid penalties:

1. Confirm Your Method for WFH

• Fixed-rate (67c/hour) OR Actual cost.
• Don’t mix them up within the same claim year.

2. Track Your Hours Properly

• 1 July 2022 – 28 Feb 2023 → 4-week diary acceptable.
• From 1 March 2023 → Daily record required (timesheets, rosters, diary).

3. Keep Receipts and Bills

• At least one document for each expense type (fixed-rate).
• All receipts + apportionment calculations (actual cost).

4. Double-Check Government Payments

• JobKeeper, JobSeeker, Pandemic Leave → Taxable.
• COVID-19 Disaster Payment, Economic Support → Non-taxable.

5. Review Other Work-Related Expenses

• RATs and PPE are only deductible if employer-required and not reimbursed.

6. File On Time

• Individuals lodging their own return → Due 31 October.
• Lodging through a registered tax agent → Later deadline applies, but you must register with them by 31 October.

Tip: The ATO can request up to five years’ worth of documentation. Digital storage (cloud or local backups) is the safest way to avoid losing receipts.

COVID-19 didn’t just change the way we lived and worked; it reshaped the way Australians lodge their tax returns. From new work-from-home deduction rules to different treatments for government payments, the ATO has tightened its expectations. The message is clear: if you want to maximise your refund and avoid penalties, you need to understand the new rules, keep detailed records, and steer clear of common mistakes.

I’ve seen too many taxpayers in Melbourne and beyond lose money — not because they weren’t entitled to deductions, but because they didn’t follow the updated requirements. With careful preparation, the right documentation, and an eye on compliance, you can turn tax time from a headache into a smooth process.