The Australian Taxation Office expects COVID-19 to continue to impact the income and deductions taxpayers will report during this tax period and provides this guide on what you can claim.
“We know many have faced significant challenges this year and the ATO is here to help you get your taxes done right the first time,” said ATO Assistant Commissioner Tim Loh.
At this tax time, taxpayers should be aware of changes in circumstances that may affect what should be included as income or what can be claimed as a deduction.
Some of the most common changes for taxpayers include receiving an income support payment and changing what can be claimed as a work-related expense.
“Tax time can be a smooth and easy experience if you know what income you should include and what COVID-19-related expenses you can claim on your tax return,” Loh said.
Taxpayers and their registered tax agents affected by COVID-19 or financial hardship can access assistance at ato.gov.au/coronavirus
COVID-19 Work Related Expenses
Effective July 1, 2021, taxpayers who paid for a COVID-19 test for work-related purposes (such as to determine whether they can attend or remain at work) can now claim a deduction for the test.
Taxpayers must have a record to show that they paid for the test, a receipt or invoice is usually preferred. If there is no receipt or invoice, reasonable proof is a document indicating the cost of the test and the obligation to take it for professional purposes. For example, a bank or credit card statement or proof from an employer can be provided.
Taxpayers cannot claim a test provided by their employer or if they have been reimbursed for the cost by their employer. Only tests required for work-related purposes can be claimed.
“If you bought a COVID-19 test for a trip with your friends, you can’t claim a deduction,” Loh said.
Taxpayers may be able to claim a deduction for the cost of protective items that protect against the risk of illness or injury in the line of duty.
“If you are spending your work day near customers and you are at risk of contracting COVID-19, you may be able to claim a deduction for protective items such as gloves, face masks or sanitizer. This will be most common in industries such as retail, cleaning and hospitality,” Mr Loh said.
The ATO has a list of protective items, equipment and products for more information.
The easiest way to track work-related expense reports is to use the ATO app.
Tax treatment of the various payments
JobSeeker payments are taxable. This information will automatically be pre-populated in the tax returns on the Government Benefits and Payments label once it is ready. If taxpayers choose to file before this information is pre-populated, it will need to be added manually. Omitting the income will delay the processing of the tax return.
COVID-19 Disaster Payment for People Affected by Restrictions
The Australian Government’s COVID-19 Disaster Payment (provided by Services Australia) is not taxable. It is not necessary to include it in tax returns.
Disaster Payment for Pandemic Leave
The Pandemic Leave Disaster Payment is taxable. This payment must be included in the tax returns for the income year in which the amounts were received. Services Australia sent a letter to recipients each time they received a payment.
Those who received the Pandemic Leave Disaster Payout will need to manually add up all amounts received and include the total amount received on their tax return. This payment will not be pre-filled in the declaration.
“Although the information is not pre-populated for you, failure to add pandemic leave disaster payments to your tax return will delay the processing of your return and your potential refund,” Loh said.
Taxpayers who have elected to use a registered tax agent should remember to notify their registered tax agent that they have received the Pandemic Disaster Payment.
The tax treatment of assistance payments may vary. The ATO website offers a quick guide to the tax treatment of various COVID-19 payments.