Basic 2020 Tax Tips & General Deduction Tips

Hi everyone, I receive plenty of private messages with very similar tax questions so I thought I would compile a list of basic tax tips that may help some of you with your 2020 tax returns.

I have posted plenty of tax posts over the years so feel free to have a look at them as there were hundreds of questions asked.

Most of you would have worked from home due to Covid and will be looking at claiming working from home deductions. There are various ways to claim working from home deductions.

For those that didn’t purchase many assets, the easiest way is to claim a flat rate per hour worked from home. From 1 July 2019 to 28 February the flat rate is 52 cents per hour. Due to Covid, the ATO has introduced a temporary rate of 80 cents per hour from 1 March 2020. You can estimate the hours worked from home and claim accordingly.

For those that purchased assets and have a home office set up in a dedicated area, using a more detailed method will get you the biggest deduction. The ATO requires a 4 week diary to be kept to use this method. You may want to go back and create a 20 day diary while your recollection is fresh. You will be able to claim expenses such as electricity, phone and internet expenses, computer consumables and most importantly, home office equipment such as a laptop/computer, furniture etc. I strongly suggest seeing your accountant with regards to claiming working from home deductions.

Other Tips

  1. Income statements (previously PAYG Payment Summaries/Group Certificates) are no longer given to you by your employer. Most employers will be using Single touch Payroll (STP) and are due to have your income statement finalised by today 14th July or by 31st July if they employ 19 or fewer employees. Once finalised you will receive a message in your MyGov to let you know that it has been finalised. Only lodge your tax return when all of your employers have finalised your income statements.

  2. Piggybacking on prior point, try and wait for all the information to be available. Don’t lodge early because you want that refund so bad. Not all dividends will be prefilled by the ATO so check all of your holdings if you are going to lodge early. Trust distribution tax statements won’t come out for another month at least, so just be patient. It sucks having to amend a return or worse, the ATO initiating an amendment because new information comes to light later on.

  3. The ATO is getting more and more information with regards to crypto so if you have cashed out crypto investments, please try and figure out your gains and discuss with your accountant if you are unsure of capital gain rules (50% discount for example). Even if you are selling one crypto to buy a diff crypto and you don’t physically cash out the money, it is still considered a capital gain event that you have to include in your tax return.

  4. To claim travel expenses, such as transport fees, tolls, expenses incurred in overnight stay, you must not have been reimbursed by your employer. Usually as an employee, your employer is reimbursing you for most travel. Important to remember that ordinary travel from work to home and home to work is not deductible.

  5. To claim motor vehicle expenses you must own the car and travel between two different places of work, either travel with bulky items to work or travel to conferences and other work related functions away from your place of work. There are two methods, the easiest being a deduction of 68 cents per work related kilometre travelled. The other method will usually give you a greater deduction but it means keeping a 12 week log book of all travel in the vehicle. If you want to claim motor vehicle expenses using the log book method, you should be asking your accountant about what information they will need from you.

  6. Be diligent with claiming rental expenses on your rental property. Remember that not all repairs are immediately deductible. Be aware of tainted loans and apportioning interest deductions. If your property is brand new, get a depreciation schedule.

  7. Your prior year accountant fees are deductible. This includes stationary and printing tax documents and travel to go and see your accountant.

  8. Only donations to deductible gift recipients are deductible. Grab the ABN from your receipt and search it on ABN lookup to check the DGR status.

  9. If you have a spouse, be sure to include their income in your return (especially if you included them in past years). This will assist the ATO in calculating the Medicare levy/surcharge and other rebates.

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Comments

  • Question, although I have already submitted my tax return!

    I have equipment on a depreciation schedule still going from prior years through the work expenses section. I read that the 80c method means you can't claim any equipment whatsoever as it should be covered under the 80c. So I backed out all of this years equipment, but was I ok to leave in the previous equipment from prior years? (I didn't - not that I am losing sleep over it because it was a tiny amount but still!)

    • I think its fine, nothing to worry about. Ideally you would have to stop claiming depreciation on it but they won't pull you up on something that small.

  • Thanks Nicole love your posts every year.

    With the amount of tax questions on Ozbargain why do you think people don't want to ask their accountant?

    • 9/10 people arnt interesting enough to have complex tax returns

    • They may not want to pay their accountant for advice or may want to get a wide variety of answers first. In my experience most of the tax answers on ozbargain are from people guessing and aren't accurate. Always best to see a professional if the matter is complex.

  • +1

    Try hard not to lie, they have these damn things called computers, and these bastards talk to eachother behind our backs

    • Data matching is getting better and better each year. Not declaring income is definitely not a good idea.

  • On point #5 - what if you get a pre tax vehicle allowance from your employer per annum of say $10k and is prorated, taxed and included in addition to your monthly salary can you still claim the through either method 68cpkm or 12 week logbook ?

    • how can the allowance be pre tax and yet still taxed and included in addition to your monthly salary? If it is pre tax then it is a salary sacrifice arrangement with your employer no?

      • Example:

        Pre-tax payments:

        Monthly salary - $xxxx.xx
        Car allowance (upto 20k pa km band) - $1,000.00

        Tax:
        Full income tax is based on taxable income of ($xxxx.xx + $1,000)

        It's not salary sacrifice. As my employment offer was salary ex. Super plus car allowance.

        Im not restricted by what car I can buy, however the vehicle km's used should be 90% for work use and max 10 % personal and I have a logbook.

        Hope the info above explains it a bit more, and based on it could I still claim through either method ?

        • If you are getting taxed on the 1,000 car allowance then its not pre tax. Its a normal allowance. And yes use the log book method it will give a greater deduction. Bare in mind driving to work from home and back home is not deductible so that does not count as work related travel when u make up the log book.

  • -3

    Hi Nicole. Thank you for your very informative posts.
    Very long time lurking, I signed up to ask you a question.
    With regards to occupancy expenses for home office, like rates, water bills, home and content insurance, maintenance.
    Are you able to claim those as a home office deduction for an investment trust that has a office set up in the home occupying say 10% of the home?
    The office is used by the trustee a certain number of hours per week to run the investments of the trust and a 4 week diary is kept for the hours.
    Other costs like electricity, heating etc are calculated with the 52c/h method.
    Thank you.

    • Is the property owned by an individual? If so, claiming occupancy expenses will mean you can't claim the main residence exemption when the house is sold and there will be a small gain. Not recommended.

  • -2

    Yes the property is owned by an individual, but it will not be sold for many years.
    Occupancy expenses do not have a label or tag by themselves so get all added together with other expenses in the return.
    The trust would claim the expenses in its return, not the individual trustee.
    Is there any other implication or tips?

    • the trust can't claim occupancy expenses for a property it does not own

  • -3

    Can the trust refund the owner for the occupancy costs?

    • No. there is no expense incurred by the Trust. the trust can rent out a portion of the property for work to be performed, but then the individual would have to have a rental schedule and once again loses the main residence exemption. It is never a good idea to claim occupancy expenses on a main residence.

  • +1

    Thank you Nicole.
    So the same would apply to the other home office costs included in the 52c/h?
    The trust does not incur the costs.

  • How are you finding dealing with the ATO re: cashboost and JobKeeper Nicole?

    Some have been a breeze but some have been real hell bent on the most random things…

    • Yes its annoying for some of them. Just have to persist until they apply it. Once you get the boost for march the june and sep ones should automatically come through when bas is lodged

  • Question how to work out capital loss ? Do I just deduct sale price from purchase price including fees. Using the capital gain/loss calculator on the ATO ?

    • In a nutshell yes. There are things that can reduce your purchase price depending on what asset it is, such as capital returns and AMIT cost base reductions. But generally it is proceeds less costs.

  • Hello.

    Is it still possible, if I have not lodged my 2019-2020 return to….

    1. pay say $10,000 after-tax dollars to my Super account (minding the 25k+carry over (if any) concessional cap)
    2. send a "Notice of intent to claim or vary a deduction for personal super contributions" to my Super provider for 2019-2020
    3. wait for the Super provider to send me confirmation
    4. then claim the deduction on my return?

    Thanks.

    • +1

      Yes, you have to do it before your tax return is lodged or due to be lodged. So find the due date of your return and send in the notice.

      Be mindful that you shouldn't be doing this if you have accessed the Covid early release of super as your deduction will be declined and you may face penalties.

      • Thanks.

        • Did you make the payment prior to 30 June?

          • @nicolemcmilllon: Well I have made payments before 1st of July but I was asking about after 30th of June.

            I see after June 30th it is not possible to make more payments for the 2019-2020 year.

            Thanks Avo and Nicole.

      • Aren't you required to contribute the funds before 30 June 2020 to be able to make the deduction in that tax year? It's the notice of intent to claim, and acknowledgement letter that can be made and received after 30 June

        • Sorry i thought it was a given that he had already contributed the money prior to 30 June 2020.

          The way I interpreted the question was that the person has already made the contribution prior to 30 June however they have not yet lodged their return.

    • As i work in super - your funds need to have reached your super fund on or before 30th June 2020 for the FY 19/20 to be considered in your tax return.

      You can still use the carry forward rule towards your cap for 20/21, but your contribution and form will now fall into this financial year, so hold onto it for your next tax return =)

      • Wish.
        But no I can not carry forward as my super is more than $500k according to ATO.

  • Hey Nicole, I know this isn't a FAQ, but I just have 2 questions I was hoping you could help me answer:
    1. If an item is $320, but I don't want to depreciate it over its useful life, can I just claim $300 this FY?
    2. Would I be able to claim purchases that I made via Gumtree? I have the tax invoice, but it's not in my name.

    Thank you :)

    • +1
      1. Unfortunately you're not supposed to. You should be depreciating it over its effective life.
      2. Usually no. However I assume you bought something from gumtree and the seller gave you their original receipt? Depending on the amount you (if less than a few hundred) then you should be fine. In future it is also handy if you have a screenshot of the gumtree messages and the ad itself.
      • Appreciate the advice. Thanks :)

  • I have capital losses from some shares I sold back in 2014. I didn't record this on my tax return as I didn't know you could use it to later offset gains. This year I also had some capital losses but had capital gains from shares I sold. What would be the best approach to offsetting part of my gains with the losses from 2014 and this FY?

    Thank you for answering these questions even though it's not an FAQ, I appreciate your time regardless of if you answer me or not.

    • +1

      I wouldn't lose too much sleep over it. Just include the loss in your calculation for your 2020 capital gains/losses as a prior year loss.

      • Thanks, good to know I don't need to amend my 2014 return.

        • How big is the 2014 capital loss? Under a couple grand?

          • @nicolemcmilllon: Yeh, well under $2k.

            • +1

              @[Deactivated]: Shouldn't be a problem mate.

              • @nicolemcmilllon: Hi Nicole,

                In regards to capital loss from share you mention, is there maximum amount you can claim? Also what if I have capital loss prior to 2014? Is there time limited I can claim as prior year loss?

                • +1

                  @Jugg.Judy: There is no maximum amount, but Ideally you would have included the loss in your return from the year you incurred the loss and it would carry forward indefinitely.

                  You should see a tax agent when preparing the return for the year there is a gain as they will know how to correctly apply the loss.

  • Slightly different from a question above, if an item is worth just over $300, but is only used 50% of the time for work purposes, is it necessary to depreciate the item?

    • +1

      Still necessary to depreciate. In my personal opinion if its $350 bucks its not gonna matter, just claim the $175 deduction. Your tax benefit is only gonna be around $60 so its not that big a deal.

  • Just asking because I couldn't find the answer to my query, I worked for a recruitment agency for a month and it is appearing pre filled under sole trader/business income and asking about personal services income / business income and all sorts of things I don't know how to fill out despite reading through the ATO pages and live chat. It states I should be able to amend it in step 4 but I can't. Not sure if I should be listed as an employee and getting conflicting info from ATO website. I worked in an office for a logistics company paid by a recruitment agency.

    I didn't earn enough to pay tax due to long term travel - how should i submit this? Or give up and go to my tax agent… lol.

    And a few other random queries…

    If i do mystery shopping alongside a regular income, is there much claimable?

    If i just started with a Spaceship investment account, what information do i need to provide?

    If i make donations to charity and can't find all my receipts, is it best to avoid guessing? (amounts are pretty low)

    I lodged a few tax returns in one go - how do i claim back using a tax agent for multiple years?

    Appreciate any assistance!

  • +1

    i'll do my best to answer some of these, you should be going to a tax agent to do your return. it should only be <$120 for a simple return.

    It is personal services income and should be included in label 14 on the tax return. Not sure how to navigate the online self tax thing but as an agent its pretty simple on our system.

    Not many deductions for mystery shopping, maybe hand sanitizer and wipes

    Don't guess donations, check your bank accounts. If under $100 in total then its fine just put $100, not going to make a diff.

    Tax agent fees are deductible in the financial year a payment is made. So if you made the payment in the period 1 July 2019 to 30 June 2020 then they are deductible in your 2020 return, regardless of what period the fees relate to.

    • Hi Nicole

      Don't guess donations, check your bank accounts. If under $100 in total then its fine just put $100, not going to make a diff.

      Just a question regarding donations. You mentioned that under $100 is not going to make a difference.
      I make donations at the church almost every week. $5 or $10 note every time when they collect during the service, but off course they do not issue a receipt for that.
      I knew that for bucket type donations you can claim up to $10 so I used to just claim that, but I think my donations during the year at the Sunday church service are closer to $400. Can I safely up the claim to $400 or at least $100 even though I have no receipts?

      • Hi EveryLastCent , I believe monetary offerings made in the context of sunday church services are not tax deductible. Your question of 'bucket type donations' I think is referring to this section on the ATO website where it refers to "examples such as approved organisation for natural disaster victims", which seems to be referring to instances where a receipt is not required for a small amount up to $10, BUT to registered organisations that have DGR status, and you can check the DGR status of an organisation here: http://www.abn.business.gov.au/Tools/DgrListing

        https://www.ato.gov.au/Individuals/Income-and-deductions/Ded…

        Basically if an organisation such as a church not have specified "Deductible gift recipient status" then you cannot claim, a tax deduction for your donation. Sometimes a church may have a particular fund that DOES have tax deductable status such as a building or education fund but generally, "general fund" donations do not. hope that helps :)

        • Hi HungryTotoro,
          Thank you for your reply.
          I know the Church has a DGR status because in the past we did a donation of $500 and we got a receipt for tax deduction.
          For the weekly church service donations it would be awkward to ask for a receipt. Not even sure if they would oblige anyway because if everyone asks for one it would become a logistical nightmare for them.
          I never bothered, even though it ads up to hundreds of $ over the year, but then I saw Nicole's reply mention that "If under $100 in total then its fine just put $100, not going to make a diff." so I thought it may be possible even without dozens of $5 or $10 receipts.

          • +1

            @EveryLastCent: I suppose you cannot keep track of cash offerings each week in writing, practically, but perhaps you could set up an automatic EFT for weekly giving as it will make it easier for the church treasurer to issue you the receipt come EOFY for your eligible deduction and you could track it in your bank statements. That is what I do, and it takes away the stress of making sure you have X amount of physical cash in your wallet each week ready for that.

            Another way you think about it is the spirit of giving at church, that enables your paid ministry workers, ministries as well as buidling and utilities to keep on functioning, so that more people can hear about Jesus, perhaps this is an opportunity to practise generousity in your donation whether it is tax deductible or not. I have certainly found that helpful to be more focussed and intentional with that money I set aside for sundays.

            All the best with your decision.

  • Awesome information!

    I work two gigs. One as an employee (amount is taxed by my employer) and another as a sole trader.

    I have to pay the tax on the earnings from my sole trader job ( not sure how to do this…).

    How do I go about doing my tax return myself for both these roles?

    Thanks!

    • Youu can do it yourself on MyGov but you may want to see an accountant. The going rate at our firm is around $150 which will be deductible in the next year so its probably better to get someone to do it for you to ensure you don't make mistakes if you aren't confident in doing it yourself.

      Effectively, it is your wages as an employee plus your net income from your business (less expenses) that equal your taxable income. Then you pay tax on that entire income less the amounts withheld by your employer.

  • Hi there,

    First time ever doing a tax return.

    I'm looking to use the fixed rate method (0.52c) bought a keyboard ($160) for about 60% work purposes. Can I claim the full amount as it is under 300 or should I declare it as $96?

    I will appreciate any advice.

    Thanks

    • Can't claim the full $160 only $96 as that is the percentage of time the asset is used for work purposes.

  • I am wanting to claim some distance traveled in my car for work. I work as a bar tender/duty manager and have had to go between venues (under the same owner) once or twice a week for stock runs (in my car). To calculate it I did the distance between the two venues (as shown on google maps) for a round strip and on average 1.5 times a week because sometimes it was once and other times it would be twice, and then I did that for 7 months (because I only worked there for 8 months - i was let go of once Covid hit). Anyway it ended up totaling around 1100 kms or so. However I dont have any kind of logs or any other kind of "proof" besides this calculation. Would that be enough to prove to the ATO? if i can show my calculations?

    • Yes that should be enough as you are using the cents per km method and not the log book method.

  • Hi nicolemcmilllon,

    I have a few simple, general questions. I've read answers on the ATO site but I don't trust myself to interpret things like this correctly so I'd like to hear form you:

    1. How long do I have to keep old personal tax/income/receipt documents for?
    2. If I bought assets a long time ago (eg. 10 years ago or longer ago than the retention period I asked about above), do I have to keep this paperwork?
    3. Can the ATO audit me for things from eg. 20 years ago?

    I don't want to hoard all this shit, physically or digitally, indefinitely.
    Thanks.

    • Generally it is 5 years. If its an asset, then it should be 5 years from the last time you claim depreciation. So if you bought the asset 10 years ago but the depreciation wasn't fully claimed until 2 years ago, then you must keep info for another 3 years.

      ATO can only go back 4 or 5 years when auditing I believe, unless its fraud, in which they can go back as far as they like.

  • Hi Nicole,

    If I decide to lodge myself using mygov, in regards to dividend franking credit, mygov will prefill this right?
    Also I saw quite a few discount tax agent e.g. in shopping centre etc, are they any good? if I decide to let them do my tax this year (I never use tax agent as I always lodge myself), do they charge same fees for everyone? My tax is just prsonal tax plus shareholding dividend franking, capital gain and loss from share.

    • +1

      Don't use the ones at a shopping centre. You don't know if they are real registered agents or if your data is safe. When using an agent you have to check that they are registered with the Tax Practitioners Board.

      For example, we charge around $160 for a return like yours. If you are in the 34.5% tax bracket, you will get the $160 as a deduction in your 2021 return which will mean a tax saving of $55 so its costing you around $100.

      Mostly, using an agent gives you peace of mind knowing that things have been calculated correctly and that if the ATO has any issues, they will call the agent first.

  • Hi Nicole,
    I have been buying the Financial Review daily to keep up with the share market and manage my share investment portfolio.
    The cost is only $4 each, so I mostly pay cash to get rid of coins or small notes.
    I do keep the papers in a stash in the garage for a year or so, and every year about Christmas time get rid of the previous financial year stash.
    I never claimed for that but I have been reading that the ATO allows a "Books, periodicals and digital information" deduction.
    During the year I estimate it adds up to about $1,000 in Financial Review papers. I know it sounds a lot to spend on newspapers, but I am retired and I read most of it so I get good value out of it.
    Do you think I would I be able to claim any of that?

    • Should be fine, as long as you have dividends income in your tax return of more than $1,000. Claim it in the dividends deduction section.

      • Well, the dividends income is in an investment portfolio held by a trust .
        I am the trustee and make all investment decisions for the trust.

  • Hi Nicole,

    How would you account for the fees paid for a failed crypto mining service?

    E.g. paid $2000 for a mining contact but only generated e.g $200 of bitcoin.

    Would record it as $1800 capital loss or would there be a way to deduct the $2000 and report $200 as capital gain?

    • -1

      Username checks out

      • +1

        lame

  • Equipment/ furniture under the price of $300 each can be claimed only with 52c method and not with 80c short cut method. Is that right?

    Can multiple items worth less than $300 each be claimed? Or is it limited to be total of $300 max?

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