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Tax 2020: It's not a race

Tax Time 2020 has arrived, but it may not be the routine process a lot of people expect. Many individuals with reduced incomes or who have increased deductions might be keen to lodge their income tax returns early to get their hands on a refund. However, the ATO warns against lodging too early, before all your income information becomes available.

It's important to understand that employers will have until the end of July to electronically finalise their employees’ income statements. A similar timeframe applies to other information from banks, health funds and government agencies.

ATO support

With so many different types of incomes and expenses affecting tax obligations this income year, the ATO is taking a range of different approaches to support taxpayers and the community through tax time. In addition to updating published information on the website, the ATO is also encouraging taxpayers to search its online “ATO community” for any information that is not listed on its website. The community forum operates 24 hours a day and contains “ATO-endorsed” responses.

If you work in a sector that has been deeply impacted by COVID-19 (eg. retail, hospitality, fitness), 2020 has perhaps not been the best year. However, you may be able to get a larger refund than usual – due to either being on reduced incomes or having the ability to claim a wider range of deductions, such as deductions for protective equipment (eg. gloves, face masks, sanitiser or anti-bacterial spray), or in some cases, a combination of both.

This tax time the ATO expects to see a substantial increase in people claiming deductions for working from home or for protective items required for work.

– Assistant Commissioner Karen Foat.

For most people, income statements have replaced payment summaries. So, instead of receiving a payment summary from your employer, the income statements will be finalised electronically with the information provided directly to the ATO. The income statement can be accessed through myGov and the information is automatically included in your tax return if you use myTax.

Registered tax agents like The Peak Partnership also have access to this information, so we can help you get your 2020 tax return right.

Tax time 2020 is not a race

According to the ATO, it is important to wait until your income statement (which details year-to-date salary and wages, PAYG withholding tax, and employer super contributions) is finalised before lodging a tax return to avoid either delays in processing or a tax bill later on. Your income statement will be marked “tax ready” if it is finalised. Other information from banks, health funds and government agencies are also expected to be ready by the end of July and will be automatically inserted into your tax return.

If you still choose to lodge early, the ATO advises that you review any information that is pre-filled and confirm that it is correct and that you wish to use it. You will also be required to acknowledge that your employer may finalise your income statement with different amounts and that you may need to amend your tax return and additional tax may be payable.

Tax return tips

With the impact of the Australian bushfires and the global Coronavirus pandemic, plus the associated government economic stimulus measures, there are some key tax-related matters to be aware of this year.

The ATO has a range of approaches to support taxpayers through tax time 2020, especially where new circumstances mean you might be receiving a different type of income or be able to claim new deductions. The ATO’s Tax Time Essentials page is a one-stop resource for the things that are a little different this year and how they impact tax returns.

People accessing super early as a part of the COVID-19 early release scheme can rest assured that this money will not form a part of their assessable income. To date, 1.98 million people have withdrawn an average of $7,475 (of a maximum $10,000) from their super under the scheme.

Another key difference this year is the introduction of the optional simplified method for claiming work from home expense deductions. This method allows you to claim 80 cents for each hour you worked from home from 01 March 2020 to 30 June 2020, to cover all deductible expenses. However, if you were working from home before 01 March 2020 or have documented actual expenses that work out to be more than 80 cents per hour you can still use the usual method to claim expenses related to working from home.

If you were unable to work from home and had to take leave or were temporarily stood down, if your employer made any kind of payment, either regular or one-off, those amounts will need to be declared as wages and salary on your return and tax will apply at your usual marginal rates. This applies regardless of whether the payments are funded by the government JobKeeper scheme.

If you’ve been made redundant or had your employment terminated, any payment you receive may consist of a tax-free portion and a concessionally-taxed portion, which means that you could potentially pay less tax.

If you still want to lodge early?

We can help you work out the best estimate of your income for the year from the various sources to minimise the chance of paying additional tax. If you’re not sure about the deductions you can claim this year, we can help you work that out – just contact our Accounting Advisers us for expert assistance.

You can also free download the ATO's 2020 Tax Time Toolkits for different occupations – simply click on your occupation category below:

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