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Don’t let these Tax Time myths slow down your return

At a time when many people want the tax refund that they are expecting to arrive quickly, the Australian Taxation Office (ATO) is warning people not to get tripped up by tax time myths that slow down returns.

Usually, tax returns lodged electronically are processed in less than 2 weeks.

 

Top tax time myths for 2020

 

Bank details don’t update themselves

 

While ATO receive information from banks, this doesn’t extend to updating details for the bank account you nominate to have your refund deposited into. Last year many people in their rush to lodge early forgot to update bank details and delayed their refund.

 

It’s not okay to double dip

 

ATO is concerned that some taxpayers may either accidentally or deliberately double dip by claiming their working from home expenses using the all-inclusive shortcut method while also claiming for specific items such as laptops or desks.

 

It’s important to remember that if you’re claiming under the shortcut method, you cannot claim a separate additional deduction for any expenses you incur as a result of working from home.

 

Home to work travel is not claimable

 

Generally, most people cannot claim the cost of travelling from home to work unless you are required by your employer to transport bulky tools or equipment and there is not a safe place to store these at your workplace.

 

If you are working from home due to COVID-19, but need to travel to your regular office sometimes, you still cannot claim the cost of travel from home to work as these are still private expenses. Even though you are working from home, your home is still a private residence – it is not a ‘place of business.

 

You can’t just claim $300 or $299 if you had no expenses!

 

ATO often see people claiming a deduction despite not purchasing anything. When ATO question them, they often find it’s because they thought everyone is entitled to claim $300.

 

“While you don’t need receipts for claims of expenses up to $300 but you must have actually spent the money and be able to show us how you worked out your claim.”

 

Work-related expenses need to be work related!

 

Each year people claim personal expenses under the guise of work-related expenses, but you can only claim for expenses that are directly related to earning your income.

 

ATO have been reminding taxpayers recently that if they are in jobs that require physical contact or close proximity to customers and they had to buy their own hand sanitiser, gloves or masks for use at work, that they can claim these items.

 

“However, people who aren’t in jobs that aren’t in close proximity to the public or people who have purchased these items for their general use, cannot claim these items.

 

“For example, people who are working from home can’t claim these items and so a high work from home claim together with a large claim for protective items may trigger a red flag and slow down your return.

 

“People also cannot claim for the costs of setting their children up for home schooling. These costs are private expenses.”

 

Lodging earlier doesn’t always mean getting your refund earlier

 

Each year the ATO automatically includes information from employers, banks, private health insurers (and this year JobKeeper for employees and JobSeeker amounts) in people’s returns. For most people this information is ready by the end of July.

 

Since leaving out income can slow your return down, if you are lodging before we have automatically included this information for you, it’s really important that you ensure you include all of the information.

 

Contact Expert Tax on 0449 952 855 or 1300 869 829 for lodgement of your personal and business tax returns.

 

 

2020 Income Types and treatment

 

JobSeeker: how to treat in tax return

 

JobSeeker payments are taxed.

 

The ATO will automatically load this information into the ‘government payments and allowances’ section in your tax return, but it will not necessarily be there from July 1.

 

This means if the information is missing when you do your tax return, you will have to provide this information to your tax agent or wait until the data is available on ATO portal.

 

“Leaving out income can slow down your return or result in a bill later so it’s definitely best avoided.

 

JobKeeper: how to treat in tax return

 

JobKeeper payments are taxed as regular income.

 

If you have received JobKeeper payments from your employer do not need to do anything different to other “normal” years.

 

The payments will be included as salary and wages and/or allowances, in your regular income statement, which your employer provides directly to the ATO.

 

The income statement sent to the ATO can be viewed by your tax agent.

 

Sole traders that have received the payments need to include them as income for the business.

 

Stand down payments: how to treat in tax return

 

Some Australians in the past three months have received a one-off or multiple payment from their employer for being temporarily stood down from work.

 

These payments are also taxable and appear in their income statement and in their return.

 

If people aren’t sure whether these amounts have been included in their income statement, they should check with their employer.

 

Early superannuation withdrawal: how to treat in tax return

 

There is good news for those who took advantage of the relaxed rules around emergency withdrawal of superannuation funds.

 

If you received early access to your super this year under the special arrangements due to Covid-19, any amounts you’ve withdrawn from super under this program are tax-free and you do not need to declare them in your tax return.

 

Contact Expert Tax on 0449 952 855 or 1300 869 829 for further assistance.

 

 

Work from home – Shortcut method

 

ATO has introduced a shortcut method to simplify how you calculate your deduction for working from home. This method is temporary and only available for the period 1 March to 30 June 2020. All employees working from home in this period can use this method.

 

Using this method, you can claim 80 cents per hour for each hour you work from home during the period 1 March to 30 June 2020.

 

You can choose to use this rate if you:

 

  • are working from home to fulfill your employment duties, not just carrying out minimal tasks such as occasionally checking emails or taking calls
  • have incurred additional running expenses because of working from home.

 

The shortcut method covers all your work from home expenses, such as:

 

  • phone expenses
  • internet expenses
  • the decline in value of equipment and furniture
  • electricity and gas for heating, cooling and lighting.

 

If you use this method, you cannot claim any other expenses for working from home.

You do not need to have a dedicated work area to use this method. However, you must keep a record of the number of hours you have worked from home. This could be a time sheet, roster, a diary, or documents that set out the hours you worked from home.

 

You do not have to use the shortcut method; you can choose to use one of the existing methods to calculate your deduction. You can use the method or methods that will give you the best outcome if you meet the working criteria and record keeping requirements for each method.

 

If you had a work from home arrangement before 1 March 2020, you would need to use one of the existing methods to calculate your deduction for the period 1 July 2019 to 29 February 2020.

 

Contact Expert Tax on 0449 952 855 or 1300 869 829 for further assistance.

 

 

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