Don’t jump the gun and lodge too early
Tax time 2021 is almost here, but it’s likely to be anything but routine. Many people on reduced incomes or who have increased deductions may be eager to lodge their income tax returns early to get their hands on a refund. However, as always the ATO is warning against lodging too early, before all your income information becomes available. It’s important to remember that employers have until the end of July to electronically finalise their employees’ income statements, and the same timeframe applies for other information from banks, health funds and government agencies.
For most people, income statements have replaced payment summaries. So, instead of receiving a payment summary from each employer, the income statements will be finalised electronically and the information provided directly to the ATO. The income statement can be accessed through myGov and the information is automatically included in the tax return for people who use myTax.
Tip: Tax agents can also access this information, and we’re here to help you get your return right this year.
Although you may be eager to lodge as soon as possible, the ATO has warned against lodging too early, as much of the information on your income may not be confirmed until later. It’s generally important to wait until income statements are finalised before lodging a tax return to avoid either delays in processing or a tax bill later on. Your income statement will be marked “tax ready” on myGov when it’s finalised, and other information from banks, health funds and government agencies will be automatically inserted into your tax return when it’s ready towards the end of July.
If you still choose to lodge early, the ATO advises carefully reviewing any information that’s pre-filled so you can confirm it’s correct. When lodging early you’ll
also have to formally acknowledge that your employer(s) may later finalise income statements with different amounts, meaning you may need to amend your tax return and additional tax may apply.
How COVID-19 has changed work-related expenses
COVID-19 has changed many people’s work situations, and the ATO expects their work-related expenses will reflect this during tax time in 2021. In 2020 tax returns, around 8.5 million Australians claimed nearly $19.4 billion in work-related expenses.
“Our data analytics will be on the lookout for unusually high claims this tax time”, Assistant Commissioner Tim Loh has said. “We will look closely at anyone with significant working from home expenses, that maintains or increases their claims for things like car, travel or clothing expenses. You can’t simply copy and paste previous year’s claims without evidence.”
The ATO does know that some “unusual” claims may be legitimate, and wants to reassure people who have evidence to explain their claims that they have nothing to fear. It also recognises that tax rules can be confusing and sometimes people make mistakes on their returns while acting in good faith.
Remember, to claim any work-related expense you must have spent the money yourself and not been reimbursed by your employer. The expense needs to be directly related to earning your income (not a private expense), and you need to keep relevant records (receipts are best).
Working from home
The temporary shortcut method for working from home expenses is available for the full 2020–2021 financial year. This allows an all-inclusive rate of 80 cents per hour for every hour people work from home between 1 July 2020 and 31 June 2021, rather than needing to separately calculate costs for specific expenses.
All you need to do is multiply the number of hours you worked at home by 80 cents, keeping a record such as a timesheet, roster or diary entry.
Remember – the shortcut method is temporary. To claim part of an expense over $300 (such as a desk or computer) in future years, you still need to keep your receipts.
The temporary shortcut method can be claimed by multiple people living under the same roof and (unlike the existing methods) doesn’t require you to have a dedicated work area at home.
The shortcut is all-inclusive. You can’t claim the shortcut and then claim for individual expenses such as telephone and internet costs and the decline in value of new office furniture or a laptop.
Tip: The existing fixed rate and actual cost methods are also still available for claiming work-related expenses instead – we can advise on what’s best for your situation.
Personal protective equipment
If your specific work duties involve physical contact or close proximity to customers or clients, or your job involves cleaning premises, you may be able to claim personal protective equipment (PPE) items such as gloves, face masks, sanitiser or anti-bacterial spray.
This includes industries like healthcare, cleaning, aviation, hair and beauty, retail and hospitality.
Car and travel expenses
If you’re working from home due to COVID-19 but need to travel to your regular office sometimes, you can’t claim the cost of travel from home to work, because these are still private expenses.