This financial year, there have been some changes to the tax deductions you can claim due to COVID. Read on to learn more from an experienced Sunshine Coast accountant.
The federal government made some changes to what you can claim during COVID so you may be able to look forward to a lower tax bill than you were expecting.
Our Sunshine Coast accountants are already busy preparing to help our clients minimise their tax payments for 2020-2021. Take a look at some of the things we will be highlighting, which you may or may not be aware of.
Bad debts can be written off
COVID-19 has hit a lot of people and businesses hard. As such, it is expected that many debts will go unpaid.
Many business owners aren’t aware that bad debts can be written off. For example, if a client owes you $20,000 for work you have completed, this is $20,000 less money earned this year. Claiming it on your tax will help improve your cash flow so you don’t fall behind on your bills yourself.
Before you claim, you will need to show as much proof as possible that you have done everything in your power to recover the debt. Hold on to any written evidence that you have, including the invoice and any follow-up reminders or communication.
Not surprisingly, tax deductions have been extended to include the purchase of sanitising and protective equipment for some businesses and individuals. As long as you pay for it yourself and work in an industry that requires close contact with other people, such as the airline industry, hairdressing, or, naturally, the medical industry, you will most likely be eligible.
In 2020, the Government also extended the amount business can write off on equipment to $150,000. Talk to your accountant if you have made any big purchases. Provide evidence so you can claim part of the cost and minimise your tax bill.
A deduction can be made for any personal contributions you make to your superannuation up to $25,000. Your contributions can be claimed from the money your employer pays into your super (if they pay super on your behalf).
You also have to make sure that you notify your super fund of your intentions. The ATO has extensive instructions on how to deal with such a deduction.
Travel for work + your vehicle and its upkeep
There are a couple of ways things are different now in this area. To begin with, many travel expenses that were not previously deductible now may be considered so if you are required to quarantine. The ATO website outlines some examples of which travel expenses are now tax-deductible, such as having to quarantine in a hotel for two weeks when returning from interstate work.
COVID-19 has restricted public transport and many are choosing the safer option of using their private vehicle even when public transport might be available. This means there are reasonable claims that you can make in relation to your personal vehicle if you use it to travel to and from work-related events. For more information and to speak to your accountant.
If you have your own business and need to purchase a vehicle to get around, the cost of this purchase may be partially claimable as a business expense. Claiming it as a tax write off will reduce your taxable income.
If you’re based on the area, talk to your Sunshine Coast accountant about which travel expenses can be written off.
Home office expenses
In this current age of pandemic, however, more and more people are working from home and the ATO understands and supports this.
Possible deductions include the cost of electricity, cleaning, and phone and internet costs. Deductions don’t extend to coffee and tea though so don’t get carried away!
For an extensive look at all of the new issues which have surfaced thanks to COVID-19, check out the ATO’s COVID-19 FAQ information.
Seek out the best Sunshine Coast accountants to help you ensure you are claiming as many tax deductions as possible.
Mobbs & Company are specialist tax accountants based on the Sunshine Coast and in Brisbane. Contact us for help getting up to date with your small business or personal tax and we will make sure you get the best return possible.