Tax time 2020: Work-related hotspots for 2020

https://www.ato.gov.au/Tax-professionals/Prepare-and-lodge/Tax-Time-2020/?=redirected_TaxTime

The ATO has also announced work-related expenses deductions that it will be paying close attention to this year, in light 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.”

The Tax Office also expects to see a substantial increase in people claiming deductions for working from home as a result of COVID-19 restrictions.

A new shortcut method has been introduced by the ATO for taxpayers to calculate home office expenses at a rate of 80 cents per hour for the period between 1 March and 30 June 2020.

The new 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.

Claims before 1 March 2020 must be under the two previous approaches.

ShortCut Method

Under the new arrangement, taxpayers will be allowed to claim a rate of 80 cents per hour for all their running expenses, rather than needing to calculate costs for specific running expenses.

The requirement to have a dedicated work-from-home area will also be removed, with multiple people in each household allowed to claim the new rate.

The new method will cover the period starting 1 March 2020 until 30 June 2020, with the ATO open to extending the method depending on when work patterns start to return to normal.

Tax agents or self-lodgers must include the note “COVID-hourly rate” in 2019–20 tax returns should they nominate to use the new method.

The simplified method will cover all deductible running expenses, including electricity for lighting; cooling or heating and running electronic items, phone and internet costs; and the decline in value of a computer, laptop, home office furniture and furnishings.

Under the fixed-rate method, these running expenses were calculated at the rate of 52 cents per hour, with phone and internet expenses and decline in value on computers needed to be calculated separately.

The new arrangement will require records of the hours worked at home and can be in the form of timesheets or diary notes.

ATO assistant commissioner Karen Foat said the new shortcut method would make tax time easier for those who were working from home for the first time in light of the ongoing coronavirus pandemic.

“The shortcut method provides a rate of 80 cents per hour and will only require you to keep a record of the number of hours worked from home,” Ms Foat said.

“This recognises that many taxpayers are working from home for the first time and makes claiming a deduction much easier.

“If you choose to use this shortcut method, all you need to do is keep a record of the hours you worked from home as evidence of your claim.”

The new method will be supplementary to the fixed-rate method and the actual cost method of calculating running expenses, with taxpayers able to choose the appropriate method for their circumstances.

Claims before 1 March 2020 must be under the two standard approaches.

Assistant Treasurer Michael Sukkar welcomed the temporary arrangements.

“Today’s announcement is yet another demonstration of how every arm of government is working to keep Australians in jobs and businesses in business, and to build a bridge to recovery on the other side,” Mr Sukkar said.

“The ATO has undertaken to review these arrangements in line with COVID-19 developments to see if they are required for the next financial year.”

ATO example:

Bianca is an employee who works as a copywriter and editor. Bianca starts working from home on 16 March as a result of COVID-19 and replaces her face-to-face meetings with online video conferencing. 

Bianca has just bought a new laptop, desk, chair and stationery. She also wants to claim some additional gas, electricity, phone and internet costs due to working from home.

Under the shortcut method, Bianca can now claim all her expenses under a rate of 80 cents per hour. All she needs is her timesheets.

Bianca can also decide to claim using existing working-from-home calculations. Under that method, she can claim the desk, chair, gas and electricity under the 52 cents per hour, but she would need to work out the decline in value of the laptop and calculate the work-related portion of the laptop, stationery, phone and internet.

Leave a Reply

Your email address will not be published. Required fields are marked *