2020 tax changes you should know

With all that has been going on in the country within the past 6 months, bushfires and COVID-19, individuals and businesses have had to pull through a lot. Fortunately, the government has recently changed some tax rules to give both businesses and individuals some relief. This should help offset the increased cost of working from home for individuals and incentivise businesses to continue investing in improvements. We’ve provided a complete run down of everything you need to know regarding tax changes for 2020 and beyond.

Individuals

Working from Home? What can you claim?

From 1 March 2020 until 30 June 2020 the ATO has announced special arrangements due to COVID-19 making it easier for people to claim deductions for working from home. The new arrangement which may be extended depending on when work patterns return to normal increase the rate to 80 cents per hour for all running expenses of a home office.

To be eligible to use this method, you must have spent the money, not been reimbursed by your employer and have a record to prove it including a diary or timesheet.

The claim covers all of your additional running expenses such as:

  • Electricity and gas
  • Decline in value and repair of capital items such as office furniture
  • Cleaning expenses
  • Phone and internet expenses
  • Stationery
  • Decline in value of computers and devices

The COVID-hourly rate can be claimed per individual meaning if you have multiple people working from home each person can claim the 80 cents per hour rate. Important to note that this rate is optional and is directed at people who do not normally work at home. 

The ATO’s view is that occupancy costs such as mortgage interest payments and rent cannot be claimed by those who are temporarily working from home due to COVID-19.

Cents per km changes

From 1 July 2020 the cents per km rate for work related car expenses is increasing from 68 cents to 72 cents per km.

HECS Repayment thresholds

For the 2020 financial year, the HECS repayment threshold is $45,881 however is increasing to $46,620 in the 2021 financial year.

Businesses

Treatment of Government Subsidies and Grants

State and Federal governments have provided many types of relief during the COVID-19 pandemic from grants to loans and other subsidies. It is important to make sure these are treated correctly for tax purposes.

  • JobKeeper Subsidy – assessable
  • Cashflow Boost (PAYGW) – non assessable
  • QRIDA Job Support Loan – non assessable, coded as non current liability
  • Small Business COVID-19 Adaption Grant – assessable

Your advisor and bookkeeper at Link will make sure all of the subsides and grants received are treated correctly in your income tax return.

$150,000 Instant Asset Write Off

From 12 March 2020 until 30 June 2020 the instant asset write off threshold has increased from $30,000 to $150,000 and the eligibility has expanded to include businesses with turnover of less than $500 million.

A major exclusion is cars which have a depreciation limit of $57,581 in the 2020 financial year.

Superannuation Amnesty

If you are wanting to participate in the amnesty, you must apply by 7 September 2020. The amnesty allows employers to disclose and pay unpaid superannuation guarantee charge from 1 July 1992 to 31 March 2018. Eligible disclosures will not incur the $20 administration fee. Payments made before 7 September 2020 will also be tax deductible.

If you think you might have unpaid superannuation, then get in touch with your advisor at Link to discuss applying for the amnesty before its gone.

End of financial year employee reporting

If you are a business employing staff and reporting their wages through single touch payroll, a finalisation declaration needs to be made by 14 July 2020 (if employing 20 or more staff) or 31 July (with 19 or fewer staff). The traditional payment summaries do not need to be provided to employees, instead they will access their Income Statement through MyGov.

Company Tax Rate

From 1 July 2020, the company tax rate will reduce to 26%

 2020FY2021FY2022FY
Base Rate Entity27.5%26%25%
All Other Corporate Entities30%30%30%

What is a base rate entity?

To be eligible for the 26% company tax rate next financial year, your business needs to have aggregated turnover of less than $50 million and no more then 80% of the income can be passive income (interest, rent, dividends, trust distributions).