We outline tax deductions for working from home, super contribution opportunities and the Government’s temporary financial relief initiatives in response to the Coronavirus crisis.
Boost your tax refund and super balance this year-end
As we enter a new financial year, it's a good time to revisit the applicable tax deductions for working from home, super contribution opportunities and the Government’s temporary financial relief initiatives in response to the Coronavirus crisis.
Working from home - deductions for expenses
If you work from home and incur expenses that are not reimbursed by your employer, you may be able to claim them as a tax deduction. The expenses must be directly related to working from home.
There are three ways you can choose to calculate additional running expenses including the ‘shortcut method’ which has been temporarily introduced by the Government to make it easy for people to claim their expenses if they’re working from home due to the current health crisis.
only available for the period 1 March to 30 June 2020 for the 2019/2020 financial year and from 1 July to 31 December 2020 for the 2020/2021 financial year
The shortcut method allows you to claim a tax deduction of $0.80 for each hour worked from home for the allowable period if you incur additional deductible running expenses as a result of working from home. These expenses might include such things as heating, lighting and print cartridges. If you intend to make a claim, ensure you’ve kept a record of your hours worked and include a ‘COVID-hourly rate’ in your income tax return.
Fixed rate method
The fixed rate method allows you to claim:
Actual cost method
The actual cost method allows you to claim actual work-related portion of all running expenses. Calculated on a reasonable basis, this method involves keeping a diary to record work expenses and keep documentary evidence of specific costs over a representative four-week period a period.
For more details, please refer to the ATO website under ‘employees working from home’.
Concessional Contributions include super contributions made by your employer and your own personal deductible contributions to super. They are effectively taxed at just 15% rather than your marginal tax rate. Generally, the cap on concessional contributions, each financial year, is $25,000. It can make sense to contribute the maximum amount and take advantage of the tax savings each financial year.
But, don’t worry if you missed the deadline for the 2019/20 finanacial year because you can ‘carry-forward’ the unused portion of your concessional contributions cap from both the 2018/19 financial year and the 2019/20 financial year to the 2020/21 financial year. Then, for future financial years, they can be carried forward, on a rolling basis, for five years.
This is possible as long as you have a total super balance of under $500,000 at 30 June of the financial year just past.
The government continues to review it’s Coronavirus stimulus package with a number of initiatives discontinuing, whilst others extend into the 2020/21 financial year.
Early access to super
Regardless of whether you have already accessed some of your super in the 2019/20 financial year, if you are eligible, you can still access up to $10,000 of your super after 1 July 2020. The ATO will accept applications, via MyGov, until 31 December 2020.
Minimum pension payment changes
To help retirees regain the value of their super after the recent market downturn, the minimum pension payments the Government requires you to withdraw from your account-based pension or similar product will be reduced by 50% in the 2020/21 financial year.
If you have previously requested that your super fund pay you the minimum amount, they may automatically reduce your payment to the new minimum which could halve your expected pension amount. You can change this at any time by contacting your adviser or super fund.
JobSeeker Coronavirus Supplement
The Government has expanded eligibility for income support payments, including JobSeeker, such as waiving some waiting periods and increasing the amount of income your partner can earn before it stops your JobSeeker payment.
Instant asset write-off for businesses extended to 31 December 2020
The Government has extended the time period eligible businesess can apply for an instant asset write-off within the increased thresholds.
That is, if you own a business with aggregated annual turnover of less than $500 million (increased from $50 million) you may be eligible for an instant asset write-off on assets of up to the value of $150,000 (from $30,000) until 31 December 2020 (extended from 30 June 2020).
From 1 January 2021, this threshold reduces to $1,000 (for businesses with less than $10 million turnover).
The measure applies to new or second-hand assets first used, or installed ready for use, between 12 March 2020 until 31 December 2020 (inclusive). Certain assets are excluded, for example, horticultural plants and capital works deductions.
If you are an owner or director of a business and are currently struggling due to the Coronavirus crisis, the ATO will also tailor solutions for your circumstances.
If you need advice on any of these initiatives please contact your financial adviser.