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What COVID 19 means for your taxes

covid tax imageIt’s tax time, but this year your tax return might look a little different. Millions of Australians have had their finances impacted by the coronavirus pandemic in some way, shape or form. And these impacts on your finances could also have an impact on your tax return.

For example, you might have had your income reduced, lost your income entirely or switched to working from home. You might have found yourself on JobKeeper or JobSeeker payments or even dipped into your super.

Here are some key ways that your taxes might be affected this year and any actions you need to take.

Did your income change?

If you had your income reduced, this will be reflected in your end-of-year income statement. You employer will provide you with the information on your earnings for the year. They will either make this information available to you on MyGov, via the Single Touch Payroll System, or will provide you with a payment summary.

Make sure you check this before lodging your tax return, as it’s what the ATO uses to calculate how much tax you should get back (if any). You can use an online income tax calculator to see how much tax you should be paying for the full year in line with what you earned.  

JobKeeper and JobSeeker payments are taxed like any form of income. The tax will be withheld on these payments automatically at your marginal tax rate, so you don’t need to do anything extra to declare these at tax time.

Did you start working from home?

If you worked from home at all between 1 March and 30 June 2020, you’re able to claim an extra deduction this tax time.

One option for claiming this extra deduction if you worked from home between 1 March and 30 June 2020 is to claim 80 cents per hour for each hour you worked at home between these dates, as a blanket tax deduction for your home running expenses like Internet and electricity. What you’ll need to do is tally up the hours you worked at home and multiply this by 80 cents to get your deduction amount. You also need to add the reference “COVID hourly rate” for this deduction so the ATO knows this is what you intend to claim. | Alison Banney,

Did you withdraw from your Super?

Millions of Australians took money out of their super this year as part of the government’s early access to super scheme for those who saw their income impacted by COVID-19. If you were one of them, don’t worry, there’s nothing extra you need to do when lodging your tax return. 

The money you withdrew was already taxed by your super fund, so you don’t need to declare it as income and it shouldn’t appear in your income statement. 

Did you need to buy extra items for your job?

If you had to purchase personal protective items like gloves, hand sanitiser and face masks to do your job, it’s likely you can claim these costs at tax time. However, you can only claim the cost of these items if you need them to perform your job, for example if you’re a nurse or paramedic.

If your employer or workplace supplied these items or reimbursed you for the cost of the items already, then you can’t claim these again as a tax deduction.

Like most areas of our lives, COVID-19 has also affected our finances and will impact our tax returns. If you’re unsure what you can and can’t claim as a deduction this year or you’ve got a more complex tax return than usual, a tax agent can help you lodge your return correctly. 

Alison Banney is the banking and investments editor at Finder

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