I simply can’t believe that it’s already September with the deadline of 2 November looming for lodgment of your 2020 tax return. This year feels like the unwanted gift that just keeps on giving!
So far 2020 has probably been a year a lot of us would like to forget, although for me it has been very special with the birth of my third child seven weeks ago. Being on maternity leave during the COVID-19 pandemic has certainly had its upsides; I haven’t missed out on any parties or weddings and it has also given me plenty of time to keep across the constant government announcements, many of which affect the 2020 income tax year.
The first thing I’d like to get you across is registration of your ‘My Gov’ account. If you haven’t already got yourself set up, now is the time to do it. My Gov is the government’s portal for their online services, which includes the ATO, Centrelink and Medicare. If you have already setup My Gov you will also need to ensure that you have linked the ATO as a service. If you have already done both, grab a coffee and skip the next 2 paragraphs.
To create your My Gov account, head over to my.gov.au, you will need a current email address and documents to identify yourself. To link the ATO as a service you will need your TFN, however the easiest way to do this is to contact the ATO and get a ‘linking code’ phone 13 28 61. Please see the following link for any easy ‘How To’ video: https://www.ato.gov.au/General/Online-services/Get-started-with-myGov-and-ATO-online-services/
To prepare for your 2020 income tax return, one of the first things you should do is log into your myGov account and head over to the ATO linked services. Under the tab ‘income statement’ you can access your PAYG summary from your employer (if you are still calling this a group certificate its time for a night cream!). If you have been in receipt of JobKeeper or JobSeeker payments these will be reflected on your income statements as usual. You do not need to do anything differently to account for these payments.
Through the ATO linked service you can view a ‘pre-filled’ copy of your tax return which is essentially a record of all the information the ATO has already collected for the 2020 year. To view this, go through the tab ‘Manage Tax Returns’ and select the current year. ‘Pre-filled’ information can include income statements from your employer and/or centrelink, interest received, dividends, limited capital gains information and private health insurance data. You can also lodge your own tax return through this portal, however I always recommend seeking the advice of a professional accountant.
If you choose to use the services of an accountant you should still check and verify the details in your ‘pre-filled’ report and note any issues to take with you to your meeting. Your accountant also has access to these reports so you don’t need to write down all the details. Other information that you need to take to your accountant includes the following:
The most common deductions individuals can claim relate to their work expenses. Generally, to claim a deduction for a work-related expense such as uniform or travel, the cost must directly relate to your job. Your employer must not have reimbursed your expenses and you must also be able to produce the proof of purchase. In some cases a bank statement or statutory declaration will be accepted as proof of purchase.
If you have received investment income you could be entitled to claim for costs related to this income, such as interest charged on money borrowed to buy shares or rental properties. You may also be eligible to claim the cost of investment advice.
This year, the ATO has introduced a ‘shortcut’ method to calculate a deduction if you worked from home between 1 March 2020 and 30 June 2020. For this timeframe, individuals can claim 80 cents for each hour you worked from home to cover any eligible tax deductions. If you wanted to use this method you will need to keep a record of the hours worked from home.
The ATO website provides more details on the deductions that you can claim and the supporting evidence required. This can be accessed through their website at ato.gov.au
Child Care Subsidy (CCS) reconciliation has also started for the 19/20 income tax year and now is the time to update your income estimates with centrelink. If you have children in daycare or other approved service you may be receiving CCS. Each year the government withholds 2% of your payments to create a buffer for any overpayments. When you lodge your tax return (or advise the ATO that a return is not necessary) there is a reconciliation that is done between the income estimate that your benefits were based on and your actual income. Any variance is then adjusted and you either receive or are liable to pay additional CCS.
Finally the ATO has announced that its areas for close monitoring will again include unsubstantiated work-related expenses and rental deductions. Make sure that you only claim what you are entitled to and always remember that once you have lodged your tax return, keep all records of your expenses. The ATO may ask you to provide evidence to support any claims that you make.