Your clients are well aware that 2020 has been difficult, but you can help by reminding them that their tax return doesn’t need to be.
One very helpful hint from the outset will be to avoid the very unhelpful myths that circulate during Tax Time — and most certainly over this current Tax Time in particular. This is especially the case at a time when many people want the tax refund that they are expecting to arrive quickly.
“There are always a range of myths that need busting around Tax Time, and the changed circumstances this year have seen some new additions to the list,” Assistant Commissioner Karen Foat says. She adds that last year, nearly 500,000 individual tax returns were amended, with some taxpayers even amending their own returns before they were processed, which of course slows down the processing of their return.
Many taxpayers are of course working from home, and questions will naturally arise on the back of these changed employment conditions. However most of the established taxation principles remain in force despite these unusual conditions.
2020’s top tax myths
Lodging early not necessarily means an early refund
One thing that clients may need to be reminded of, for this year in particular, is to resist the urge to lodge as early as possible — even though that refund is a tempting focus for them. The COVID-19 element is more than likely to mean third-party information from employers, banks, private health insurers (and this year JobKeeper for employees and JobSeeker amounts) may not be fully available until later in July or indeed mid-August.
Also, while the ATO receives information from banks, this doesn’t extend to updating details for the bank account your client nominates to have their refund deposited into. “Last year many people in their rush to lodge early forgot to update bank details and delayed their refund,” Foat says.
Shortcut double dips will be a focus
The ATO is concerned that some taxpayers may either accidentally or deliberately “double dip” by claiming their working from home expenses using the all-inclusive shortcut method while also claiming for specific items such as laptops or desks. It’s important to remember that if clients are claiming under the shortcut method, they cannot claim a separate additional deduction for any expenses incurred as a result of working from home.
Home to work travel not claimable
“If you are working from home due to COVID-19, but need to travel to your regular office sometimes, you still cannot claim the cost of travel from home to work as these are still private expenses,” Foat says. “Even though you are working from home, your home is still a private residence – it is not a ‘place of business’.”
Generally, most people cannot claim the cost of travelling from home to work unless they are required by an employer to transport bulky tools or equipment and there is not a safe place to store these at the workplace.
No expenses? Then you can’t just claim $300
“We often see people claiming a deduction despite not purchasing anything. When we question them, we often find it’s because they thought everyone is entitled to claim $300,” Foat says. “While you don’t need receipts for claims of expenses up to $300, you must have actually spent the money and be able to show us how you worked out your claim.”
Each year the ATO finds taxpayers trying to claim personal expenses under the guise of work-related expenses, however there is a COVID-19 difference this year.
“We have been reminding taxpayers recently that if they are in jobs that require physical contact or close proximity to customers and they had to buy their own hand sanitiser, gloves or masks for use at work, that they can claim these items,” Foat says. “However, people in jobs that aren’t in close proximity to the public or people who have purchased these items for their general use, cannot claim these items.
Clients may also need reminding that they cannot claim for the costs of setting their children up for home schooling, as the ATO views these costs aa being private expenses.