Preparing your tax return? Here are the COVID-19 tax deductions you may not have heard about

The current financial year is the last in which employees can make use of a special working-from-home tax deduction.

The current financial year is the last in which employees can make use of a special working-from-home tax deduction. Photo: Getty

The clock is ticking towards the end of the financial year, which means it’s time to start preparing your tax return.

If you worked from home during last year’s lockdowns, the good news is the Australian Taxation Office has extended the shortcut method of claiming work-from-home costs until June 30, 2022.

And the pandemic has dished up some special deductions, too.

Under the shortcut method, you can claim 80 cents per hour for each hour worked from home.

You will need time sheets or diary records to back up your claim, but the 80 cents per hour covers everything.

You cannot claim any other work-from-home costs even if you invested in new equipment.

Alternatively, there is the option of claiming 52 cents for each hour you worked from home.

This covers the basics such as additional electricity for home heating, cooling and lighting, with the flexibility to claim extra expenses such as higher internet charges separately.

That said, it pays to toe the ATO line, and accounting body CPA Australia suggests taking a conservative approach.

“When it comes to claiming deductions, if you think it’s a ‘yeah, nah’ situation, the answer is probably ‘nah’,” says Elinor Kasapidis, CPA Australia’s senior manager covering tax policy.

Among the claims Ms Kasapidis says the ATO will reject include Zoom-ready home décor.

“Those carefully curated books, plants and throw rugs are not deductible,” Ms Kasapidis said.

Tim Tams and other 3pm pick-me-ups are off the agenda, too.

“Your boss may provide bikkies at work, but that doesn’t mean you can claim them when you’re working from home,” she said.

If you are on the hunt for extra tax deductions, work-related purchases costing up to $300 can usually be claimed this financial year.

Spend above $300 and the item needs to be written off over several years.

Are rapid antigen tests (RATs) tax deductible?

Potentially – though the ATO says you need to tick several boxes.

RATs must be a requirement of your job, which can be the case if you need to show a negative test before fronting up for work.

You must have paid for your own RATs without reimbursement from your employer – and have receipts to back up your claim.

The clincher is that you can only claim the cost of RATs used for work.

If you picked up a bulk lot for, say $200, but only used half the tests for work, you can only claim $100 on tax.

What about PPE?

It is much the same deal when it comes to claiming the cost of personal protective equipment including masks, hand sanitiser, gloves and antibacterial spray.

ATO assistant commissioner Tim Loh said: “If you are spending your working day in close proximity to customers and at risk of contracting COVID-19, you may be able to claim a deduction for protective items.

“This will be most common in industries such as retail, cleaning and hospitality.”

The cost of PPE is usually only tax deductible if you paid for the equipment yourself without the boss chipping in – and you must have proof of purchase.

Declaring COVID-related income

On the other side of the ledger, COVID-19 has introduced new types of income that may need to be included in this year’s tax return.

JobSeeker and Centrelink’s Pandemic Leave Disaster Payments are both fully taxable.

But the lump-sum COVID-19 Disaster Payments are not taxed, and do not need to be included in your tax return.

For details of what can be claimed for a wide range of jobs, head to the industry-specific guides on the ATO website.

If in doubt, Ms Kasapidis suggests running a claim past your tax agent before putting your head in the lion’s mouth by lodging your return.

Topics: Tax
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