By Genevieve Waldie
The Australian Tax Office (ATO) affirms that the 2020 tax return is quick and easy to be lodged.
The agency has received over 1.7 million individual 2020 returns, (an increase of 12% for the same period last year), and has already paid out more than a billion dollars in 2020 tax returns.
ATO Assistant Commissioner Karen Foat said the ATO has a range of support to help people through this tax time.
“So far, we’re looking at a record-breaking tax time in terms of lodgement numbers, but one thing we don’t want to see is a record-breaking number of easily avoidable errors. These errors slow down returns or might lead to unexpected debt down the track,” said Ms Foat.
SolutionWire brings to you important tips from ATO that may prevent headaches during the process of lodging your declaration.
Use the ATO online tool, MyTax
The ATO online tool for self lodging called myTax is the quick, simple and easy way to manage your own tax return. Available online 24/7 for all individuals (including sole traders), so you can lodge at your convenience.
If you are lodging your own return and you don’t already have a myGov account, you will need to set one up. Once linked to your tax file number and the ATO, you can access a range of services in one place and lodge your tax return on any device – computer, smartphone or tablet.
If you are expecting a tax refund, lodging online is the quickest way to receive your refund, usually within two weeks. Paper returns are processed manually and can take up to 10 weeks.
Don’t file late (or too early)
If you lodge your own return online by myTax, you need to do so by 31 October, and missing the lodgement deadline can result in financial penalties. Any tax payment is due date is three weeks after the lodgement deadline. Late paying may lead to interest charges added by the ATO.
Lodging online helps streamline the process. The ATO automatically includes information from banks, private health insurance, employers and government agencies (this year JobKeeper & JobSeeker payments are automatically included).
This information is pre-filled by the ATO by late July. Lodging your tax return before all this information has been filled by the ATO can also slow your return.
COVID related deductions available for 2020 tax returns
As many employees’ working arrangements have changed due to COVID-19, the ATO has introduced a shortcut method for claiming working-from-home related tax deductions. This makes it easier to calculate deductible expenses and can be used by multiple people working from home in the same house.
From 1 March 1 to 30 June 2020, you can claim a deduction of 80 cents for each hour you work from home, provided that you are carrying out your ordinary employment duties and have incurred additional running expenses as a result. It’s important to keep a record of the hours you have worked from home and if you use this method, you will be unable to claim any other expenses for working.
While some deductible expenses such as travel may have decreased this year, other workers may be able to make claims for protective clothing required such as gloves, face masks and hand sanitiser.
Update bank details
While the ATO receives some financial information directly from banks, this does not include nominated account details for your tax refund. For a speedy return, remember to check correct details for your nominated bank account.
Ensure you have receipts for donations made during the year to tax-deductible gift recipients such as registered charities. Taxpayers often forget to claim them because they forget to keep a record. As most charities now issue receipts by email, it is easier to file these electronically until tax time.
Reduced rental income
Many tenants are paying reduced rent or have ceased paying because their income has been adversely affected by COVID-19.
You should include rent as income at the time it is paid, so you only need to declare the rent you have received as income. If payments by your tenants are deferred until the next financial year you do not need to include these payments until you receive them.
While rental income may be reduced, owners will continue to incur normal expenses on their rental property and will still be able to claim these expenses in their tax return as long as the reduced rent charged is determined at arms’ length, having regard to the current market conditions.
This applies whether the reduction in rent was initiated by the tenants or the owner.
Some owners may have rental insurance that covers a loss of income. It is important to remember that any payouts from these types of policies are assessable income and must be included in tax returns.
Many banks have moved to defer loan repayments for stressed mortgagees. In these circumstances, rental property owners are still able to claim interest being charged on the loan as a deduction- even if the bank defers the repayments.
Include all income
The most common mistake we see with early lodgers is forgetting to report all their income, according to ATO.
ATO automatically include income information in your return from employers, banks, private health insurers, and government agencies. For most people this information is ready by the end of July. If you’re lodging early, it’s crucial you check this information is there and manually add it if it’s not.
“While we try to include as much as possible, we are asking taxpayers to add any amounts that aren’t automatically included to your return. This includes cash wages, foreign sourced income, or even gains from cryptocurrency,” Ms Foat said.
“Leaving out income can delay your return, particularly when we receive those income details from third parties whilst we are processing your return. Unfortunately, we can confirm that approximately one in five people who lodged early won’t be getting their refunds in the first batches out because they didn’t take the time to include this income.”
JobKeeper and JobSeeker
Taxpayers who have received JobKeeper payments from their employer, don’t need to do anything different. The payments will be included as salary and wages and/or allowances, in their regular income statement, which their employer provides directly to the ATO.
“Your income statement can be accessed via myGov and the information is automatically included into your tax return by the end of July. If you use a tax agent, they also have access to this information. The figures in your income statement should already include any JobKeeper you have received. If you aren’t sure, check with your employer.
Sole traders who have received the JobKeeper payment on behalf of their business will need to include the payments as assessable income for the business.
If you have received JobSeeker, the ATO will also load this information into your tax return at the Government Payments and Allowances question once it’s ready. If you are lodging before this information is included for you, you will need to make sure you include it. Leaving out income can slow your return down or result in a bill later so it’s definitely best avoided.
Early access to superannuation
“If you received early access to your super this year under the special arrangements due to COVID-19, any amounts you’ve withdrawn from super under this program are tax-free and you do not need to declare them in your tax return,” Ms Foat said.
You need to include income protection, sickness and accident insurance payments, in your tax return. The instructions in myTax explain how to include these amounts.