The COVID-19 pandemic has resulted in changes to almost every aspect of our lives and the last thing we need to worry about is our tax return.
It’s important to understand that different employment conditions, Government subsidies and the transition to working from home will all have an impact on how we prepare our tax return.
Tax expert Professor Nolan Sharkey, coordinator of the Master of Taxation Law and Graduate Diploma in Taxation Law at the UWA Law School, shares some tips on what to look out for before filing your tax return.
1. Claim your working from home expenses
Many employees have been required to work from home, meaning that part of their home has become a work place. As a result, they’ll be looking at some unexpected tax deductions for portions of their household expenses. The ATO has given options to deal with this but you should consider all possibilities at tax time to ensure you maximise your claim.
2. A helping hand for your small business
Small business has been given some tax-related assistance during the crisis. This includes an allowance to write off up to $150,000 in assets immediately. These assets would normally be written off over a few years. The allowance aims to encourage you to buy some major business items now. It’s a tempting opportunity, assuming you still have taxable profits.
3. Travel insurance for cancelled plans
Insurance raises some difficulties in taxation. The essential idea is that insurance proceeds are treated as that which they replace. The start of COVID travel restrictions meant that a lot of people made travel-related insurance claims. If the travel related to employment or business, you will need to work out the ramifications of any insurance payments you received.
4. Other expenses due to COVID-19 restrictions
In a similar manner, any additional expenses you incurred to comply with COVID restrictions (whether travel or otherwise) will need to be carefully considered to see whether they related to your employment, business or private life. It won’t necessarily be easy to determine and there will be novel tax situations.
5. JobKeeper for employees
If you’ve been receiving a payment through JobKeeper as an employee, remember that it’s simply your wage and, therefore, taxable. If you run a small business, the principle is that you’re paying your employees deductible wages. These are simply being funded through the Government.
6. JobKeeper for businesses
If you run a small business and have received JobKeeper for a business participant (as opposed to an employee), some new tax issues may arise in terms of how these are to be treated. You should investigate these issues carefully and seek advice if necessary.