With many people in Australia working from home, the Australian Taxation Office has provided additional information for deductions you can claim this tax time due to the impact of the Coronavirus. You may be asking yourself, how do tax deductions work and what can I claim this tax time? We’ll look at these in more detail below.
Your Income Statement
Before lodging your tax return online, it is important to ensure your employer has lodged your income statement (also known as payment summaries) with the ATO, and that it has been marked as ‘tax ready’. If you choose to lodge your tax return before your income statement is tax ready, you will need to review any information that has been pre-filled and you may need to adjust your tax return and any tax that is payable.
Identifying deductions you can claim
Before lodging your tax return, it may help to sort your deductions into work-related and income-generating expenses you have paid over the financial year. This will help you determine what deductions you can claim as tax expenses to reduce your taxable income.
Ask yourself these questions to identify expenses that may be acceptable tax deductions. Your tax agent or accountant may be able to help.
Was the expense directly related to your work or income-generating activity?
Did you spend money without being reimbursed by your employer?
Do you have an official record of the expense – e.g. receipt or bank statement?
If the expense was for both work and personal use (e.g. your home internet), you’ll need to work out how much of the expense was work related.
Here are 6 tax deductions you may be able to claim at tax time:
1. Home office expenses
With many of us working from home during Coronavirus, there will be home office expenses you may be able to claim as tax deductions. These could include:
Home office equipment (e.g. computers, phones, printers, chairs and desks)
Computer consumables (e.g. printer paper and ink) and stationery
Phone and Internet expenses
Keep in mind that most people aren’t able to claim general household items that may otherwise be normally provided by your employer, such as coffee, tea and milk.
There are a couple of ways you can work out your deductions:
The ATO-approved temporary ‘shortcut method’ of 80 cents per hour for all additional running expenses for the period 1 March 2020 until 30 June 2020.
Fixed rate method
Actual cost method
2. Vehicle and travel expenses
There are some work-related vehicle and travel expenses you may be able to claim including:
Where you were required to attend multiple workplaces or locations
Car expenses where you needed your car to complete work duties
Accommodation expenses when you were required to travel for work
3. Clothing, laundry and dry-cleaning
If you have purchased specific or protective clothing or work uniforms specifically related to your job, you may be able to claim back these and cleaning costs as work-related expenses.
It is unlikely you will be able to claim non-compulsory work uniforms. Check with your employer to work out what is regarded as compulsory.
If you paid for and completed an eligible course that was work-related, you may be able to claim a tax deduction.
5. Industry-related deductions
You may also claim tax deductions for work-related expenses specifically related to your occupation and industry. An example may be union fees.
6. Investment income
You may be able to claim investment income tax deductions if you’ve received:
Interest payments on your savings
Dividends from your investments in shares
Rental payments from an investment property
Another type of investment income
If you’ve received any of these, you could be entitled to claim any costs related to earning this income, such as property management fees for a rental property.
It is always a good idea to keep all records of expenses even after you’ve lodged your tax return. This is in the event the ATO asks you to provide evidence to support any deduction claims you make.
There is a lot to prepare when getting your tax time essentials ready to lodge your tax return. If you’re looking for support with calculating income tax, get in touch with us today or use our income tax calculator online.
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