COVID-19 Update: Prioritising our clients' and associates' health

Insight – Coronavirus Update

13 min read

Working from home

What do I need to know about my taxes if I work from home?

The ATO says one in three taxpayers makes a claim for work away from employer premises. In most cases, that is a relatively small claim for occasional home working, such as at weekends, in the evenings, or whilst staying home to let a tradie in. Until now, very few employees have routinely worked from home on a long term basis. Over the coming weeks, the number of people working from home will explode as offices across the country close down.

If you are an employee who is now working from home, or expects to work from home soon, you should know that if you incur extra expenses through working from home (which aren’t reimbursed by your employer), you should be able to claim a tax deduction for those costs.

What can I claim when working from home and how can I get the most out of these claims?

If you work from home, you can claim include the work-related proportions of household costs such as:

  • Heating, cooling and lighting bills

  • Costs of cleaning your home working area

  • Depreciation of home office furniture and fittings

  • Depreciation of office equipment and computers

  • Costs of repairing home office equipment, furniture and furnishings

  • Small capital items such as furniture and computer equipment costing less than $300 can be  written off in full immediately (they don’t need to be depreciated)
  • Computer consumables (like printer ink) and stationery

  • Phone (mobile and/or landline) and internet expenses

Ideally, you should have a specific room set aside as a home office. If you are using a room with a dual purpose (e.g. dining room), or a room shared with others (e.g. lounge room) you can only claim the expenses for the hours you had exclusive use of the area.

What else do I need to know?

The key information is to understand what you can claim and how you can claim. There are two ways to make a claim.

The easiest option is to claim the ATO’s flat rate allowance for home working of 52 cents per hour. This covers the extra costs of heating, cooling, lighting and the decline in value of furniture. All you need to do to claim this is to keep a diary of your home working – note the time you start work each, day, the time you finish work each day and any breaks. You can then claim 52 cents per hour for each working hour. In addition, you can also make separate claims for the work-related proportion of items like your home internet, mobile phone costs and other expenses that directly relate your work, like stationery, printer ink and even additional toilet rolls that you wouldn’t otherwise have purchased if you were working from your normal workplace.

Alternatively, you can claim the actual costs you’ve incurred. You’ll still need to keep a diary of your home working and you’ll also need to work out the amount of your home (by floor area) that you’re using as your work space. From this, you can then work out the work-related proportion of your household expenses and apply this percentage to the actual amount you spend on electricity, gas, water, phone and internet, etc. You’ll also need to keep all the original bills to prove your claim. This generally produces a bigger claim than the 52 cents flat rate but the amount of paperwork and calculation involved is much greater. You should use a tax agent to help with your claim if you intend to use this method. In addition, you can also make a claim for direct expenses like stationery, printer ink and cleaning materials.

What can people be doing now to make tax time easier?

As you’ve seen above, the key to making a claim is to keep records to prove your claim.

At the very least, you’ll need to keep a record of the time you work from home (if you simply intend to claim the ATO’s flat rate 52 cents per hour amount). If you want to claim your actual expenses, you’ll need to keep all receipts, bills, etc. Make sure you keep these records from now on – don’t try to recreate things retrospectively when Tax Time comes. You won’t be able to remember exactly what your working hours were and the chances are you won’t be able to find all your receipts – meaning your claim could be lower than it should have been.

Be proactive, file receipts and bills somewhere safe and consider keeping electronic copies in one place on your phone or laptop.

Individual Assistance

The government will pay tax-free payments of $750 to social security, veteran and other income support recipients and eligible concession card holders; with payments to commence automatically from 31 March 2020. It is estimated that around half of those who will benefit will be pensioners.

A further $750 payment will be made from 13 July 2020.

There will also be a new time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight from 27 April for the next 6 months.

Income support recipients will also have:

  • Expanded access

  • Reduced waiting times

  • Claim accelerated

  • The application process streamlined

Major superannuation changes

Relief for Retirees during the coronavirus pandemic

Recognising the significant impact that the coronavirus is having on financial markets, the Federal Government has announced a temporary reduction in the minimum pension drawdown requirements for retirees.

A minimum drawdown is required each year by those who have account-based pensions and similar products, in order to maintain the tax exempt concessions they provide. This minimum drawdown is calculated each year using an age-based percentage and the retirees pension account balance.

The minimum drawdown will be reduced by 50% for the 2019-20 and 2020-21 financial years.

If a retiree has made drawdowns in the current financial year that exceed the new reduced minimum drawdown requirement, they can NOT put the excess back into their superannuation account.

Age

Default minimum drawdown rates (%)

Reduced rates for the 2019-20 and 2020-21 financial years

Under 65

4

2

65-74

5

2.5

75-79

6

3

80-84

7

3.5

85-90

9

4.5

90-94

11

5.5

95 or more

14

7

Temporary Early Access to Superannuation

The Federal Government has announced individuals financially affected by the Coronavirus will have the ability access their superannuation.

Eligible individuals will be able to withdraw up to $10,000 of their superannuation by 30 June 2020, and a further $10,000 from 1 July 2020.

These amounts will not be taxed and won’t affect Centrelink or Veteran’s Affairs payments.

The ability to apply for early access to superannuation is expected from mid-April 2020.

To be eligible to access your superannuation you must meet one or more of the following requirements:

  • You are unemployed; or

  • You are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment, special benefit or farm household allowance; or

  • On or after 1 January 2020

    • You were made redundant; or
    • Your working hours were reduced by 20% or more; or
    • If you are a sole trader your business was suspended or there was a reduction in your turnover of 20% or more.

If you believe you are eligible, you must make an application online through myGov and be able to certify you meet one of the above criteria.

The ATO will process the application and issue a determination which will also be provided to your super fund, who will then release the superannuation payment. You do not need to contact your super fund directly to arrange this early access but do ensure they have your up to date contact details and bank account should a payment be made.

If you have an SMSF, the government is yet to provide any guidance as how to apply early access.

Business Tax Changes

Business Investment

  • The instant asset write-off threshold has been increased from $30,000 (for businesses with an aggregated turnover of less than $50 million) to $150,000 (for businesses with an aggregated turnover of less than $500 million), from 12 March 2020 until 30 June 2020.
  • A 15-month investment incentive (until 30 June 2021) has been provided (for businesses with a turnover of less than $500 million) to accelerate certain depreciation deductions by an immediate deduction of 50% off the cost of a new depreciating asset first used or installed and ready-for-use by 30 June 2021; with existing depreciation rules to apply to the balance of the asset’s cost.

Cashflow Assistance

Tax-free payments of up to $50,000 for eligible small and medium businesses (with a turnover of less than $50 million that employ staff), based on their PAYG withholding obligations.

This is not a cash payment but it is a credit equal to 100% of the PAYG amounts withheld from salary and wages paid to employees. The minimum payment is $10,000 and not-for-profit organisations are included in this scheme.

The way this will work is that businesses that lodge activity statements on a quarterly basis will be eligible to receive the credit for the quarters ending March 2020 and June 2020. Businesses that lodge their BAS on a monthly basis will be eligible for the credit for the March 2020, April 2020, May 2020 and June 2020 lodgements.

An additional payment equal to this amount will also be available from July to October 2020. This makes the total amount available under this scheme $100,000 (and a minimum of $20,000).

Payments will be automatically credited by the ATO through the activity statement system and will only be made to active eligible businesses established prior to 12 March 2020.

Wage subsidies to support the retention of apprentices and trainees, for employers with less than 20 full-time employees, may be entitled to apply for Government funded wage subsidies of up to 50% of an apprentice’s or trainee’s wage for up to nine months from 1 January 2020 to 30 September 2020, with a maximum subsidy for each apprentice / trainee of $21,000.

 

COVID-19 Updates
Share with your friends

Book an online appointment today

Our H&R Block accountants are now working online. Book an appointment with an expert.

Related Articles

JobKeeper Tax: Do I Pay Tax on JobKeeper Payments?

JobKeeper is an initiative to help businesses affected by the Coronavirus. Ge...
5 min read

Is My Business Eligible for Cash Flow Boost?

The Australian government has initiated temporary cash flow boosts to help sm...
4 min read

What the changes to government COVID-19 support mean for you

The JobKeeper Payment was due to run until 27 September 2020, but will now co...
5 min read

COVID19 Stage 4 Restrictions in Metropolitan Melbourne

ATTENTION: Melbourne H&R Block Clients impacted by the 30 June COVID19 st...
5 min read