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COVID-19 tax deductions: our personal and business accountants explain

Published On: April 8, 2020Categories: Accounting, Support

Sure, we may only be in April right now. However, with the months rapidly passing – can you believe we’re almost in May? – it won’t be long until it’s time to file your tax return.

In particular, you’ll want to start looking into what deductions you qualify for, as well as what documents and the like you’ll have to start making copies of.

We’ve talked about some of the less-common deductions your business can claim.

Of course, few individuals and businesses will ever have to make a claim for some of those unusual expenses. For most of us, our deductions will be more common in nature…


Our small business accountants in Melbourne explain the most common business tax deductions

As we all know, the COVID-19 pandemic hasn’t just affected our routines – it’s also affected our businesses.

We’ve all had to make adjustments to the ways that we do things, and tighten our belts.

Of course, it isn’t all bad news – in fact, if you ask our small business accountants in Melbourne there are even a couple of silver linings from a financial perspective.

One of these is that it’s led to dramatic changes in the tax system, with many new deductions opening up as part of the government’s coronavirus stimulus package. 

Additionally, we’ve also seen changes to existing mundane deductions.

What sorts of changes are we talking about? We’re glad you asked!

The instant business asset write-off

Have you heard of the Federal Government’s instant business asset write-off scheme? If not, you could be missing out on a significant amount of money!

Introduced in 2016, the instant business asset write-off allows business owners to immediately claim first and second-hand purchases of depreciable assets such as:

  • Vehicles
  • Computers
  • Tools

The exact amount you’ll get back depends on your business’ annual turnover, as well as the value of the assets in question, with different maximum thresholds for different turnover levels.

In response to the COVID-19 pandemic however, the write-off has been expanded even further.

Previously, the maximum threshold was $30,000 total, for businesses with up to $50 million annual turnover.

For the remainder of this tax year however, the thresholds have been raised. Now, businesses that earn up to $500 million a year are eligible to claim up to $150,000 in tax deductions.

A word to the wise, however: the new threshold only applies to purchases made from April 2020 onwards. If you have plans of claiming assets bought earlier, you’ll have to shelve them.

Prepaid expenses

As a small business owner, you know that you can claim tax deductions for ongoing and running costs on your business tax return.

Here’s something you may not have known: that also includes prepaid expenses.

Paying for things like annual policies, rent and utilities upfront can increase your allowable deductions for this tax year.

Just be warned: it will also reduce what deductions you’re eligible for next year (after all, you’re making the claim now).

Is prepaying expenses and making a claim worth it? It all depends on your business’ tax situation and circumstances.

Fortunately, our small business accountants in Melbourne will advise, weighing the costs and benefits up and helping you decide whether it’s worth prepaying.

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Ask a personal accountant: what personal tax deductions are you missing out on?

Of course, it isn’t just business tax deductions that are being increased – when it’s time to fill out your personal tax return, you may be able to claim several new tax deductions for yourself.

FIling your personal tax return may be a tad harder this year, but our personal accountants are here to ensure you don’t miss out on any of the tax deductions you’re eligible for.

The 80 cents per hour deduction

Working from home for the first time raises some questions.

In addition to the standard problems like how to stay on task, there’s also the issue of whether you can claim a deduction for utilities and running costs incurred while using your living room or spare bedroom as a temporary home office.

The ATO had a system in place for claiming deductions for utilities while working from home. 

However, it wasn’t exactly user-friendly – the old way involved calculating expenses for specific running costs and utilities.

With so many more people working from home however, a simpler solution was needed.

The 80 cent rule is a new “shortcut” method, designed for the thousands of Australians who are working from home for the first time (and who’ve therefore never had to deal with the old method).

For each hour spent working at home, you’ll be able to claim 80 cents back.

Not only that, but if you have multiple home-workers under the one roof, you’ll be able to claim the 80 cent rate for each of them.

All you need to do is keep a record of the amount of time spent “on-the-clock” at home!

Set-up costs

If you’re going to be working from home for the foreseeable future, you’ve probably noticed that your personal laptop doesn’t quite cover things, and that the kitchen bench is a poor substitute for your regular workplace.

You’ve decided that you need to upgrade, and have gone on a bit of shopping trip, buying a whole range of different equipment:

  • Desk
  • Computer monitor
  • Webcam
  • Headset
  • Computer software

The problem is that this can get pricey, especially if you’re starting from scratch.

Here’s something you may not know: did you know that many of the costs incurred when setting up your work from home arrangement can be claimed on your personal tax return?

The costs associated with setting up your work-from-home arrangement has always been tax-deductible – however, since most of us haven’t had reason to work from home in the past, many of us don’t know that this is allowable at all.

As a general rule, set-up costs can be claimed on your tax return provided that:

  1. The purchase is primarily for work purposes
  2. It’s coming out of your own pocket – your employer isn’t reimbursing you or offering a stipend
  3. You can substantiate it with receipts and other documentation

Setting up a home office can be expensive. Luckily, these deductions can make it just that little bit more affordable.

Get what you’re owed with our small business accountants in Melbourne

The tax system is notoriously complicated, with many deductions hidden behind dense legal jargon.

Not only that, but they’re also prone to changing each year. In fact, many of your “regular” deductions have been increased in response to the pandemic, meaning that you can’t just repeat what you did last tax season..

If there was ever a time to hand off your personal or business tax return to a professional, it’s now!

Our personal and small business accountants in Melbourne have one goal: to help you get where you want to be.

The way we do that is by looking at your tax situation, determining which deductions you’re eligible for and ensuring that you don’t pay more than you have to.

Since 1966, we’ve been helping individuals and small businesses all over Melbourne with timely tax advice that saves them money.

And it all starts with a phone call.

This financial year, contact Bruce Edmunds & Associates today on (03) 9589 5488, or click here request a booking online.

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