The outbreak of COVID-19 is a global pandemic having widespread impacts on millions. We at Worldwide Accountancy hope everyone stays safe and pays attention to advice from the World Health Organisation (WHO) and local authorities. From a tax perspective, there are a number of measures announced by the ATO and other factors to consider. Below we discuss your tax residency, working from home expenses and some business implications.
At Worldwide Accountancy, we are aware of a number of Australian expats who have had their plans changed due to COVID-19. You should consider if your Australian tax residency status has changed based on your individual circumstances and intentions post the COVID-19 outbreak. Illustrated below is an example:
Jasmine is an Australian living in London and working in the tourism industry. Prior to the COVID outbreak, she was considered a non-resident for Australian tax purposes as she lived in London for at the last 3 years, established a home there and effectively abandoned her residency plans in Australia (i.e. cancelled bank accounts, sold assets). However, after the outbreak her plans were thrown into disarray and she feared for her health and her job. She decided to move back to Brisbane to be with her family and friends. She returned to Brisbane on 1/4/20 and planned to stay there indefinitely.
In this situation, for the 2019-2020 tax year, Jasmine would be considered a non-resident for Australian tax from 1/7/19-31/3/20 and a resident for Australian tax from 1/4/20-30/6/20. As a part-year resident Jasmine is eligible for a tax-free threshold of at least $13,464. The remaining $4,736 of the full tax-free threshold is pro-rated according to the number of months during the financial year Jasmine was a resident for tax purposes. In this case 3 months of Australian Tax residence equals $1,184.
We understand that ascertaining your Australian Tax residency is complex enough, yet ascertaining it after a pandemic like COVID-19 is even more complex.
If you believe Covid-19 has forced a change on your residency or you require any further help, please contact us.
Claiming home expenses
If you have moved from working in an office to working from home, due to COVID-19, you may be able to claim deductions for the running expenses you incur. These include expenses associated with heating, cooling and lighting in the area you are working from, phone and internet and other running expenses.
The ATO recently announced special arrangements to make it easier for people to claim deductions for working from home. The new arrangement allows people to claim a rate of 80 cents per hour for all their running expenses, rather than needing to calculate costs for specific running expenses.
Small Business Entities (SBE’s) Tax Implications
If you or your business has been affected by COVID-19, the ATO has issued various forms of subsidies to alleviate tax payments effective March 2020 quarter. Your income tax, activity statement, pay as you go (PAYG) instalments, FBT and excise payments will be subject to said tax credits.
Income Tax Return Deductions and Write-offs for Businesses
If your business is affected by COVID-19, the ATO has outlined policies wherein businesses are eligible to claim further deductions i.e. accelerating depreciation deductions for new assets, and increasing the instant write-off threshold for business assets. Additionally, the ATO will consider remitting interest and penalties incurred after 23 January 2020 on compassionate grounds.
From 12 March 2020 until 30 June 2020, for the instant asset write-off:
- Threshold per asset is $150,000 (up from $30,000)
- Eligibility range covers businesses with an aggregated turnover of less than $500 million (up from $50 million).
Our thoughts and prayers are with the many affected by this tragedy. First and foremost, we urge you to take full care of yourself and loved ones during this unprecedented time and ensure all precautionary measures are taken. While our primary concern is the health and safety of our community, we urge you to utilise the current government tax stimulus and our services to manage your tax obligations to mitigate any extenuating circumstances you may find yourself in.
Contact us at Worldwide Accountancy for more information.