Once again the ATO has flagged its intention to examine personal tax returns carefully for their work related expense claims for the 2020 financial year. As a result of COVID-19 the ATO is anticipating changes to the deductions individual taxpayers will be claiming. Although they expect home office claims to rise they also believe deduction claims for travel and laundry should reduce with taxpayers being forced to work from home.
Taxpayers often mistakenly believe that claims for these expenses (commonly 5000 kilometres for work related travel and $150 for laundry) can be made without any substantiation but the ATO has confirmed that these costs must have been incurred to be claimed and the taxpayer must have a reasonable basis for proving the amounts given.
The other area of focus will be rental properties with the expected drop in rent as a result of COVID-19. Although this should generate higher refunds for rental property investors, they need to ensure they have kept paperwork to verify the drops in rent and prove the property was still available to rent if it is vacant. With the lockdown incurred as a result of COVID-19, many people utilised their holiday houses as a change of scenery during lockdown. As a result they will be unable to claim rental expenses for the portion of time they utilised the property.
Finally, the ATO has recommended taxpayers delay getting their tax returns processed until mid July when their employers are required to complete and lodge their final wages through Single Touch Payroll Reporting. With JobSeeker and JobKeeper payments also taxable, it is advisable to wait until this time to ensure your tax return is lodged without errors.
If you need assistance with your personal tax affairs, please do not hesitate to contact us.