At a glance
- Many Australians are accessing various forms of government support this year, due to changes in their employment or income streams.
- The tax consequences are not always clear, so the tax preparation process is critical in ensuring income and expenses are correctly reported.
- Individuals will need to be registered with myGov, or engage a tax agent well before 31 October, to get onto their lodgement program.
By Elinor Kasapidis
For public practitioners in Australia, this year’s tax time may require additional checks and discussions with clients to ensure they are aware of what information they need to provide, and the types of income and expenses that need to be disclosed.
Here are some tips to get started.
As most employers now report through Single Touch Payroll (STP), income statements (formerly known as group certificates or payment summaries) are generated electronically via myGov or through online services for agents. Some micro-employers and closely held payees may not yet be reporting through STP, so pre-fill information may not be available until later in July.
Self-preparers will need to be registered with myGov, or should alternatively engage a tax agent well before 31 October, to get onto their lodgement program, which provides deferred due dates.
Pre-fill data will be available on tax returns in myGov or through online services for agents. While this usually has a high degree of accuracy, it is best practice to check this information against records and not just accept it at face value. When relying on pre-fill information beyond an income statement to complete a tax return, it may be advisable to wait until at least early August to ensure that all the relevant data is available, in order to avoid any unexpected adjustments.
With many of us working remotely, some for the first time, the Australian Taxation Office (ATO) has announced a new shortcut method for work-from-home deductions.
With COVID-19 also resulting in many of us working from home more often or even for the first time, the Australian Taxation Office (ATO) has announced a new shortcut method for work-from-home deductions, which allows individuals to claim 80 cents per work hour for expenses incurred between 1 March and 30 June 2020 should they choose to do so. Individuals will need to keep a record of work hours at home, and have a choice of using a fixed rate or actual cost method.
As always, records of all deductions are required, so make sure any claims can be substantiated, and that this information is kept for five years after the tax return is lodged.
The ATO has created the myDeductions app for individuals and sole traders to assist in this process. It is possible to take photos of receipts, record expenses and upload the myDeductions data into the tax return. Alternatively, data can be emailed to a tax agent straight after year-end (70 per cent of Australians use a tax agent).
Many Australians have experienced changes in their employment or income streams, with some accessing various forms of support.
Sometimes the tax consequences are not always clear, and the tax return preparation process becomes critical in ensuring that income and expenses are correctly categorised and reported.
Some things to consider
If superannuation has been accessed early, under the government’s COVID-19 support package, these amounts are not taxed and do not need to be included on the tax return.
If JobKeeper payments were received, these amounts are assessable, and tax should have been withheld by the employer. If this did not occur, a liability may have been created and the ATO could be contacted to enter into a payment arrangement.
If Australian Government allowances and payments or lump sum payments, including employment termination payments, have been received, this information must be correctly reported on the tax return. If leave has been taken, or if COVID-19 led to being stood down or job loss, there are different tax consequences for payments that have been received from the employer. Where amounts are pre-filled through income statements or matched against Services Australia information, they need to be checked for correctness.
Some individuals may have received grants or other forms of support, which will need to be correctly disclosed if assessable. The ATO matches data from various federal, state and local government agencies to check for taxable government grants and payments.
If a private health insurance policy was reduced or cancelled during the year, caution must be taken not to over-claim the rebate or incorrectly calculate any Medicare levy surcharge amounts.
If additional income-earning activities have been undertaken, such as renting out property, selling on eBay or providing contract services on Airtasker, these income amounts will need to be included in assessable income, and any associated deductions claimed.
On a final note, if income has decreased due to COVID-19 or other negative impacts during the year, a pleasant surprise in the form of a larger-than-usual tax refund may present itself for the first time. This is due to benefitting from the low and middle income tax offset, which is automatically calculated when a tax return is lodged and assessed.
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