Coronavirus: How to lodge your tax return this year
Learn about the extra tax deductions you can claim due to COVID-19 and how to properly declare your JobSeeker, JobKeeper or redundancy payments.
You can lodge your tax return yourself online anytime from now until 31 October, or May 2021 if you're using a tax agent. But before you rush to lodge your tax return, make sure you've got everything you need to do it properly and you're aware of all the COVID-related deductions you could be eligible for.
hether you've been working from home, not working at all, working reduced hours or receiving government benefit payments, you could be eligible to claim some extra deductions this tax time.
How to lodge your tax return this year
You've got a few options:
- At a tax agent's office. With the easing of lockdown restrictions, tax agents are allowed to open their offices to meet clients. However, with strict social distancing rules still in place many offices may choose to remain closed this financial year.
- Online via myGov. If you've got a simple tax return, you can lodge this online for free via myGov anytime from now until 31 October 2020.
- An online tax agent. If you'd prefer a qualified tax agent to help you lodge your return but don't want to travel to see a tax agent in person, an online tax agent is a great option this year. An online tax return service can help you claim everything you're eligible for and correctly declare things like annual leave payments and redundancy payouts that you might have received this year. Plus, you can also claim the cost of the service as a deduction.
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Should you lodge right away?
You don't need to lodge your tax return straight away, you've until May 2021 to submit your tax return if you're using a tax agent. Make sure you've got your up-to-date income statement from your employer for the 2019-20 financial year before you lodge your return, as you might have paid more tax throughout the year than you needed to.
It's also a good idea to take a bit of time researching what extra deductions you could be eligible to claim this year, and how to claim these correctly. It could result in a few hundred dollars extra in your tax return.
Coronavirus special tax deductions
This year due to coronavirus there are a few extra things you could be eligible to claim on your tax return.
Can you claim working-from-home expenses?
Have you been working from home a lot more this year because of coronavirus and widespread office shutdowns? In March, Australians were told to work from home if they could to help stop the spread of the virus. This means that hundreds of thousands of people were suddenly swapping the office for their living room (or, if you're lucky, a home office).
The good news is that yes, you can claim your home office and running expenses in your tax return. Because of the huge increase in the number of people working from home, the ATO has introduced an easy, shortcut method to claiming.
You can claim 80 cents for each hour worked at home from 1 March 2020 to 30 June 2020. This blanket rule includes all your home office running expenses like heating, cooling and home Internet costs, as well as your office furniture itself.
The ATO has relaxed the rules this year so you're not required to have a dedicated home office set-up, either. This means if you're just working on your couch from your laptop you're still eligible to claim. What you can't claim is things like tea and coffee that your employer usually provides.
Can you claim home-schooling expenses?
Unfortunately you're not able to claim expenses relating to your child's learning and education as a tax deduction. If you've had to purchase additional equipment and online tools and resources while your child has been learning at home, these are classed as personal expenses by the ATO.
The primary reason for this is that tax deductions are reserved for expenses you've incurred that impact your ability to earn an income. This is why your own personal learning expenses, such as attending seminars and completing additional courses, can be claimed as a deduction. These things are seen as helping you to remain employed or increase your employment prospects.
Can I claim coronavirus-related protective gear such as gloves?
If you've purchased personal protective gear to help prevent you from contracting coronavirus, you may be able to claim the cost as a tax deduction. However, you can only claim these costs if you need the items in order to effectively do your job.
For example medical staff such as nurses, ambulance drivers and general practitioners are able to claim the cost of buying their own gloves, masks and hand sanitiser to use at work. However if you've bought the same items for your own personal use at home and when you're out and about (like doing the groceries), you can't claim these as they're not directly related to your work.
If your employer has reimbursed you for these items already you're unable to claim them on your tax return.
Our guide to tax deductions has many more ideas for the deductions you could be eligible to claim on tax.
Paying tax on JobSeeker and JobKeeper payments
If you've received JobKeeper or JobSeeker payments in the 2019-29 financial year, you may have some extra steps to complete when lodging your tax return.
Do I need to pay tax on JobKeeper payments?
Yes, you do pay tax on JobKeeper payments. These payments are taxed in the same way that your standard income is taxed. That is, they'll be included in your overall taxable income for the financial year and taxed at your standard marginal tax rate.
You won't need to do anything extra to declare these payments when lodging your tax return. Your employer will pay you like it normally would and it'll withhold the correct amount of tax on your behalf.
While the JobKeeper payments do need to be assessed as part of your taxable income, if it turns out you paid too much tax throughout the year you'll get this back in your tax return. So if you're on JobKeeper payments and you earn below the tax-free threshold for the financial year (below $18,200) you won't need to pay any income tax.
Do I need to pay tax on JobSeeker payments?
JobSeeker payments, along with most government benefit payments, are also included in your overall assessable income at tax time. You'll need to be prepared to pay any tax owing on this income when submitting your tax return, unless you've specifically requested that Centrelink withhold a small amount of your payment each time for tax.
Again, if your total income for the year including your JobSeeker payments is less than $18,200 you don't need to pay income tax. If you've requested Centrelink withhold tax from your JobSeeker payments throughout the year and you end up earning less than $18,200 for the year, you'll get the tax withheld back in your tax return.
Paying tax on annual leave payouts and redundancies
Here's what you need to do if you've received a lump sum payment for your annual leave or a lump sum redundancy payment.
Do you pay tax on redundancy payments?
Redundancy payments are often tax-free and aren't included in your assessable income for tax purposes. However, if your payout is significant you might need to pay tax on a portion of it. The size of your redundancy payment and the amount that's tax-free will also depend on how long you've worked at the company for.
The 2019/20 tax-free amount is $10,638, plus $5,320 multiplied by how many years you've worked at the company. Here's an example:
Let's say your redundancy payment was $20,000 and you'd worked at the company for 2 years full-time.
- Tax-free limit: $10,638 + ($5,320 x 2) = $21,278.
This means that your entire redundancy payment would be tax-free and would not need to be included in your income statement when lodging your tax return.
If your redundancy payment was $30,000, this would be slightly different. In this case, the tax-free limit remains $21,278 but the amount over this would be subject to tax. A tax agent can help make sure you're declaring your redundancy payment correctly and not paying any tax that you aren't required to pay.
Do you pay tax on annual leave payouts?
If you're made redundant or voluntarily leave your full-time job, your employer is required to pay you your annual leave balance. So if you've got any annual leave saved up when you leave your job, you'll get the value of this paid to you in a lump sum.
Unlike a redundancy payment, your entire annual leave payout is subject to tax at your standard tax rate. Your employer will withhold tax on the money before you receive it. This means you don't need to do anything extra to declare it as the lump sum should be automatically included in your tax return under your assessable income.
Tax implications of accessing your super
The first half of 2020 has been a busy one for superannuation because of the government's early access to super scheme. As of June 2020, more than 1.5 million Australians were approved to dip into their super early. If you withdrew some of your super this financial year, don't worry, you don't need to declare this when lodging your tax return.
Your super would already have been taxed at the special superannuation tax rate of 15% when it was originally contributed to your fund by your employer. This means you don't need to declare this money as part of your assessable income for tax. It's not considered income that you earned throughout the financial year and it has already had tax paid on it.
If you're considering withdrawing money from your super in round two of the scheme (between 1 July and 30 September 2020) this is in the new financial year, and there's no implications for your 2019-20 tax return.
Did you buy or sell shares during the market crash?
Due to the big sharemarket falls this year, there have been record-breaking numbers of new investors entering the market while prices are down. If you were one of them, here's what it means for your tax return.
Do you pay tax on the shares you bought this year?
Did you take advantage of the big market crash and buy some shares or ETFs? If you did, there are only tax implications for the ones that have paid you a dividend. If your shares haven't paid you any dividends this financial year, you don't need to do anything. The value of your shares isn't included in your assessable income for tax.
If you have received dividends this financial year, this is considered income and is therefore subject to tax. However, a lot of dividends paid by companies listed on the ASX are fully franked. This means the company has already paid tax on that money, so you as the investor will receive a credit for the tax already paid and will only be required to pay the difference in tax depending on your income tax rate.
Do you pay tax on the shares you sold this year?
Just as a lot of people were buying shares this year, a lot of people were also selling shares due to falling prices. If you've made a gain (or profit) on your shares when selling, you need to pay tax on the gain at your standard tax rate. However, if you've held the shares for more than 12 months, you'll get a 50% discount on the amount of tax you need to pay on the gain.
If you've also sold shares which have made a loss from when you originally purchased them, you can use this loss to offset any gain made. This means you can reduce the amount of tax you need to pay on your gains. But you can only use your capital loss to offset a capital gain on shares that you've sold (you can't offset your regular taxable income).
If your myGov account is properly linked with the ATO, these dividends and capital gains/losses should appear automatically when you complete your tax return. If you want help, a tax agent can make sure you declare your dividends properly and effectively use your capital losses to offset any gains and reduce your tax bill.
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