Out of all the negative things that have happened due to the outbreak of COVID-19, there has been a silver lining for many: the ability to work remotely or from home.
How Covid Has Increased Working from Home and What This Means for Your Tax Return
Sometimes considered a side benefit for certain positions, it became a mainstream way to handle major corporations’ day-to-day efforts. However, with that said, there’s also a slew of Covid tax benefits or working from home benefits that you are able to take advantage of when it comes to your tax return.
Common benefits you’re able to use more frequently
There were always working from home benefits if you keep track of your home office running expenses. This has specific stipulations and timeframes, but since so many were primarily working from home, it has hit those thresholds for working from home expenses and claims on your returns.
Keep in mind that your home office, when it comes related to the benefits associated with taxes, is a space that is solely dedicated to working for your employer or as a freelancer. That means it does not include the space where the bed is in the bedroom or the couch in the living room. Therefore, it cannot have a multipurpose function, and so it needs to be factored in when claiming these benefits on your taxes.
Another area to note is that you need to be able to fully perform your office duties at this workspace as an employee of a company. It’s not about simply checking emails or writing down a few to-do lists, but your full responsibilities should be able to be handled in this space.
This is everything from the portion of your rented space that’s used as your office and a portion of the utilities for that space. But, of course, since your space became a primary office space – common for freelancers, it has also become commonplace for any work-from-home situation. And yes, that also means utilities such as your cell phone bill and internet bills as long as they were partially or fully utilized for working from home purposes.
If your employer decides to help set you up with office equipment and hardware such as laptops, headsets, and the like, those are part of your employer’s expenses and not your own. Therefore, you cannot claim them for any type of tax benefits when it comes to tallying up your home office running expenses.
So make sure to keep everything separate and only claim those home office costs and deductions where you have proof you paid out of your own pocket and did not get any type of reimbursement for it.
COVID specific benefits
It is not directly tied to your working from home benefits, but it’s still important to note that your COVID testing and COVID quarantine may also be tax-deductible in certain situations, and usually in relation to a work-related instance or trip. It’s essential to include that when you’re handling your individual or personal tax return if asked so. The quarantine tax deduction is only applicable if the trip is for work purposes and still has some limitations to it.
Keep in mind this might go both ways. If you’ve received any remuneration from your employer in regard to testing for COVID, that actually may be a tax liability in many cases. So keep all receipts and proof for record-keeping purposes. These are also sometimes referred to as fringe benefits that go beyond an employer’s standard salary and thus end up being subject to tax.
Suppose there is a cost associated with your vaccine, and those costs were borne by the employer, either through a reimbursement to you into your salary or cash. In that case, those will also need to be declared on your personal or individual tax returns.
There were also several support payments made by the Australian government to help get through this dire time. Each of them came with information about whether they were taxable and part of your income tax returns or if they came with tax-free stipulations. All of this must be represented on your tax returns.
Sole traders were eligible for additional support, and if they were able to gain those funds, that also led to additional taxable income.
Working with a professional
It’s good to work with a professional accountant to handle all your Covid tax benefits and your working from home benefits. As the rules are regularly updated, two main methods can be used. One was built to streamline the process, and knowing which one to pick and stay compliant should be left up with an Accountant’s tax return processed accordingly.
You don’t want to mistake something when handling your individual or personal tax returns and either lose out on those working from home benefits or constantly review your home office running expenses to see if you’ve entered everything appropriately.
We have offices in the great Sydney region in both CBD Sydney and Hurstville NSW. So feel free to reach out to us at MMT Account Advisors, as we have extensive experience handling Covid Tax benefits or working from home benefits and accounting and tax preparation in general.
We’re looking forward to hearing from you and building out the best possible scenario for preparing your individual or personal tax returns. As you can see from above, there are a lot of items to consider, and you don’t want to lose out on any benefits or underreport any payments that were given to you.
This is an especially complicated time period for taxes, and we feel confident that we’ll be able to take all of your relevant information, whether working from home or COVID-19 based, and be able to ensure that all your accounting and tax reporting are aligned properly when submitting everything to the tax authorities.
You can rest assured and have peace of mind that we’ll work to handle the headache of organizing and filing everything on your behalf.