The COVID-related tax deductions you need to know
Most people are aware that the costs of working from home during the COVID-19 pandemic are a legitimate tax-deduction in your annual return.
However, there are other coronavirus-related deductions available, too.
You need evidence to show how much of your COVID-19 related expenses are work-related. Credit:Justin McManus
One that you may not know about, but could be able to claim, is the cost of work-related COVID-19 tests.
Legislation making the costs tax-deductible came into effect in March, and was back-dated to cover the 2021-22 financial year.
With rapid-antigen tests usually costing $10 or more each, these costs can quickly add up. The costs of PCR tests can also be claimed.
Mardi Heinrich, a tax partner at KPMG Australia, says the tests must have been undertaken to determine if you could go to work, or remain there, and you need notification as such from your employer. They must also have been paid out of your own pocket, and not reimbursed by your employer.
Heinrich says you can only claim the work-related portion of your COVID-19 test expenses. For example, if you bought a multipack of tests and used some for private purposes – for other family members or for leisure-related activities – you can only claim the cost of the work-related portion.
The Australian Taxation Office (ATO) says you need to keep good records of any work-related COVID-19 tests claimed, to demonstrate that you paid for them, and that they were required for you to work.
These may include bank or credit-card statements, or a diary or other documents, including receipts, that shows a pattern of buying tests after the law change, or that “could reasonably have applied from July 1, 2021.”
“If you don’t have a record of your expenses before the law changed on March 31, we will accept reasonable evidence of your expenses,” the ATO says.
Taxpayers will again be able to use the ATO’s short-cut method for claiming working-from-home expenses. This concession expired on June 30 and is unlikely to be available this financial year.
The method allows a tax deduction of 80¢ for each hour you worked from home, provided you did so as part of your ordinary employment
Heinrich says it is important to have kept a record of the hours you worked from home. If you elect to use this method, you are unable to claim any other work-related expenses.
Taxpayers also still have an option to use the fixed-rate method and the actual cost method to calculate deductions that could result in higher claims than the short-cut method.
Capital gains and losses from the sale of investment assets is another area that taxpayers may neglect to maximise their deductions.
While capital gains from the sale of investments are taxed, capital losses can be offset against gains made from sales of other investments.
Capital losses cannot be used to reduce tax on other types of income, such as salary. If there are no capital gains to offset losses, the investor can declare a loss and carry it forward, to offset future capital gains.
Most taxpayers receive refunds, so are eager to lodge their annual returns. However, it often takes the ATO until late July to pre-fill information it receives on wages, health insurance premiums and interest paid by banks on deposits.
To check if your pre-filled information is available – and confirm if income statements are “tax ready” – visit the ATO app or log-in to ATO online services via your myGov account.
The lodgement deadline for those who do their own returns is October 31, and May 15, 2023 for those using a tax agent.
The lodgement date for individuals whose last return resulted in a tax liability of $20,000, or more, is March 31.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
Most Viewed in Money
From our partners
Source: Read Full Article