EOFY: Property tax tips for 2020 plus when to avoid the ‘lazy’ work from home shortcut

Unprecedented numbers of us have had to work from home this year and for many, navigating what to claim as allowable tax deductions is perplexing.

Moreover, any resultant tax refund is especially important for those who have had their hours reduced, pay rate slashed or lost their jobs altogether and need this money now more than ever.

Start with the basics

Being able to justify anything you claim is essential, so the best place to start at tax time is to keep all your receipts and make sure your diary is as detailed as possible to support your movements, particularly if you are going to meetings and claiming travel expenses, advises Coco Hou, chief executive of Platinum Accounting.

“Do a review or audit of all your expenses that could be claimable if you’ve been working from home,” she says.

The ATO has developed a new method for people to claim their expenses this year, which is designed for households where there is more than one person working from home.

Known as the shortcut method, from March 1, 2020 to June 30, 2020 people can claim their expenses at a rate of 80 cents an hour. “You don’t even need a dedicated work area to apply the shortcut method,” Hou says.

Before March 1, 2020, you can use the fixed rate method of claiming costs at 52 cents an hour or use the actual cost method. The idea is to use the method that gives you the highest amount when claiming work-related costs.

“You can claim computer consumables like printer ink, as well as protective items like gloves, masks and sanitisers if they are connected to earning your income,” Hou adds.

The lazy way is simply using the shortcut method, says Alex Jamieson, founder of AJ Financial Planning. “You work out the number of hours you’ve worked at home and multiply this by 80 cents to figure out the deduction.

“The propeller-head method is looking at the actual expenses. These are things like additional electricity, phone costs and internet costs directly incurred as a result of working from home.

“But, just like with chips and salsa, double-dipping is also a no-no with deductions. You can’t also make a deduction if work is reimbursing you for an expense,” he adds.

“Mr Tax Man” Adrian Raftery notes the shortcut method has limitations. “You could be short-changing yourself with the shortcut method if you’re spending more than $32 per week on work-related expenses, based on working a 40-hour week, when you take into account all your costs.”

While it seems so long ago now, don’t forget there is also substantial tax reporting relief available for those affected by bushfires and other disasters, with more time to lodge your return and pay your tax.

“If you can’t commit to tax deadlines, it’s really important to communicate with the tax office as soon as you can. They will be surprisingly sympathetic. The ATO’s empathy has changed from a few decades ago,” he adds.

Raftery says people affected by the fires may also have an issue with damaged or destroyed tax records. “Try to reconstruct them as best you can. Technology makes this easier. But if substantiation is impossible, the ATO may waive its motto of ‘no receipt, no deduction’ if it is not reasonably possible to obtain the original.”

Property perspective

There’s every chance you will claim a loss this year if you’re a landlord with a short-term rental. This is because your income may be less than your expenses.

Says Hou: “We’re likely to see higher rental property losses this year given overseas students can’t enter Australia, working holiday visa holders have gone back to their home country and short-term rental properties are vacant due to the travel ban.”

Plus, a lot of landlords are offering rental reductions or rental holidays, which has reduced their income.

You can still claim a deduction if the tenants are paying part of the rent. “You can also claim interest on your bank loan even if the bank has deferred your loan repayments for a period,” she adds.

Jamieson recommends people who own holiday rental properties think about taking advantage of this period to get some maintenance done. “Keep in mind the property still needs to be rented on an ongoing basis to deduct these expenses.”

Bradley Beer from tax depreciation specialists BMT Tax Depreciation says many property investors are missing out on tax deductions from depreciating unexpected outdoor items.

He says garden sheds, pergolas, rainwater tanks and even swimming pools can be depreciated. “So can outdoor security systems, garbage bins and washing lines.”

Make the most of COVID incentives

If you are in financial hardship – if your income has fallen by 20 per cent or more or if you have lost your job – you can make a one-off application in this financial year to withdraw up to $10,000 from your superannuation, tax free.

You can also withdraw the same amount in the new financial year, under the same proviso. But be aware that any JobKeeper or JobSeeker payments are still taxable.

Conversely, if your income is secure and it suits your situation, you can contribute up to $25,000 each year to your super before tax and claim a deduction for this money.

There’s never been an end-of-financial-year quite like this one. So make sure you understand what you can and cannot claim to make the most of all the available incentives and deductions to put yourself in the best possible financial position.