Some of the most frequently asked Coronavirus Tax Questions

Are you wondering how your changed circumstances related to COVID-19 may affect your tax situation?

Well, you're in good company.

The Australian Taxation Office has provided a lot of information on their website to assist you.

Here's a list of the most frequently asked questions they are getting from individuals and employees as well as their answers...

I really don't like saying that we live in unprecedented times – that phrase has been used to often, but how else can we describe the current situation?

Working from Home

Question: My employer is encouraging or requiring me to work from home.

Will I be able to claim a deduction for home office expenses?

Answer: Yes, if you work from home because of COVID-19 you may be able to claim a deduction for the additional 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.

We have introduced a temporary simplified method (shortcut method) for you to calculate the additional running expenses you incur as a result of working from home due to COVID-19.

The shortcut method allows you to claim 80 cents for each hour you work from home and covers all deductible running expenses.

Multiple people living in the same house can claim this new rate.

For example, a couple living together could each individually claim the 80 cents per hour rate.

You may still use one of the existing methods to calculate your running expenses if you would prefer to.

This includes calculating your actual running expenses.

Question: Can I claim working from home expenses when I’m on leave or if I’ve been stood down during the COVID-19 period?

Answer: No, you can only claim for the actual time that you spend working from home due to COVID-19.

Working from home does not include minimal tasks such as occasionally checking emails or taking calls.

For example, if you have been stood down and you are occasionally receiving email updates from your employer about the situation, the time you spend checking those email updates will not be treated as time spent working from home.

Question: I worked from home before COVID-19 and my work pattern has not changed as a result.

Am I entitled to claim the shortcut rate of 80 cents per work hour for my additional running expenses?

Answer: Yes, the new shortcut method is intended to cover all taxpayers working from home between 1 March and 30 June 2020, whether the working arrangements are a result of COVID-19 or not.

If you normally work from home, you can continue to claim your additional running expenses using one of the existing methods if you prefer:

• the work-related portion of your actual expenses
• the fixed rate of 52 cents per hour plus the work-related portion of expenses not covered by that rate.

Question: If I use the shortcut method to claim my expenses while I work from home, what records do I need to keep?

Answer: If you are using the shortcut method, you need to keep records showing the amount of time you have spent working from home.

This could be in the form of timesheets, rosters, a diary or similar document that sets out the hours worked.

Question: If I claim my actual running expenses, what records do I need to keep?

Answer: If you are claiming your actual running expenses, you need to retain receipts for expenses along with records showing your work-related use.

Using myDeductions in the ATO app is an easy and convenient way to keep your records in one place.

Question: Can I claim for my rent or mortgage and will this affect capital gains tax if I sell my house?

Answer: Occupancy expenses relating to your home – such as rent, mortgage interest, property insurance and land taxes – will not become deductible merely because you are required to temporarily work from home due to COVID-19.

People have asked whether working from home will disqualify them from claiming the main residence capital gains tax exemption when they sell their home.

Because working from home in the current circumstances does not, in and of itself, create an entitlement to claim deductions for mortgage interest, you will not lose any part of the main residence exemption.

Work-related car expenses

Question: I claim my car-related expenses using the logbook method.

Will I need to keep a new logbook for an updated representative period of private and business usage during COVID-19?

Answer: No, you are not required to keep a new logbook for the period in which your travel has been affected by COVID-19 as long as you account for any variation in the use of the car when working out your business kilometres and your business use percentage at the end of the income year.

When working out your business kilometres at the end of the income year, you need to make a reasonable estimate based on any logbooks, odometer records or other records you have.

For the period in which your travel has been affected by COVID-19, you may keep a new logbook if you think it will provide a more accurate indication of your business use of the car.

However if your overall business usage has not changed and you are merely using the car less, the odometer readings will reflect this and you will not need to keep another logbook.

Medicare levy surcharge

Question: If I suspend my private health insurance due to losing my job and my income for Medicare Levy Surcharge (MLS) purposes is above the threshold will I be liable for MLS?

Answer: If you and all of your dependants were not covered by an appropriate level of private patient hospital cover, and your income for MLS purposes is above a certain threshold, you may be required to pay the MLS.

The rate of MLS depends on your income for MLS purposes.

This applies unless you (and your dependents if you have them) are exempt from paying the Medicare levy (see Surcharge exemption categories).

The base income threshold (under which you are not liable to pay the MLS) is $90,000 for singles and $180,000 for families (plus $1,500 for each dependent child after the first).

However, you do not have to pay the MLS if your family income exceeds the threshold but your own income for MLS purposes was $22,801 or less.

This amount was increased from $22,398 to $22,801 as part of the government's economic response to COVID-19.

If you are liable for the MLS, we will work it out based on the information you provide in your tax return.

We will include it with your Medicare levy and it will show as one amount on your notice of assessment called Medicare levy and surcharge.

If you want to calculate your Medicare levy surcharge, use the Income tax estimator.

Question: If I lose my job and suspend my private health insurance part way through the year will I get a partial exemption from the Medicare levy surcharge, if my income for MLS purposes is above the threshold?

Answer: If you hold hospital cover but temporarily suspend payments for that cover, then you may have to pay the MLS to account for the days that you did not hold the appropriate private patient hospital cover.

This will be determined from the information that you provide in your tax return and that is supplied to the ATO by your private health insurance provider.

If you were in an exemption category (see Surcharge exemption categories) for the whole of the year then you do not have to pay the surcharge.

At home learning expenses

Question: I am a working parent with school-aged children who are learning from home during the COVID-19 crisis.

Will I be able to claim a deduction for the costs associated with setting them up for learning?

Answer: No, costs relating to your children’s education are personal expenses and not deductible.

Examples of costs include:

• setting them up to do online learning
• teaching them at home
• purchasing school supplies or items like desks, iPads, or sporting equipment.

If you are an employee who is working from home, you can only claim a deduction for expenses that are directly related to your work.

Second job

Question: I have lost my job as a result of COVID-19 and have found another job.

Will I be taxed at a higher rate because it is considered a second job?

Answer: No, if you have lost your job, then you are entitled to claim the tax free threshold to reduce the amount of tax that is withheld from your pay from your new job.

Second jobs usually have a higher amount of tax withheld from your pay because you already have another job from which you are earning income and are claiming the tax free threshold. Withholding at a higher rate reduces the likelihood of you having a tax debt at the end of the income year.

When you start your new job, your employer will give you a tax file number declaration to complete.

Centrelink is also a payer and they will give you this form if you apply for their payments.

You tell your new employer that you want to claim the tax-free threshold by answering 'Yes' at question 8 'Do you want to claim the tax-free threshold from this payer?’

You do not have to claim the tax-free threshold if you want a higher amount of tax withheld from your pay.

You can see how much tax you employer will withhold from your payment by using the tax withheld calculator.

Not an Australian resident, temporarily in Australia

Question: I am not an Australian resident. I am staying in Australia for longer than I expected because of COVID-19. What are my Australian tax obligations?

(Updated) Answer: If you are not an Australian resident for tax purposes, you will be assessable only on income from an Australian source subject to the application of any applicable Australian double tax agreements (see the question on double tax agreements).

You may need to lodge an Australian tax return if you earn any assessable income from an Australian source.

This includes salary or wage income that is assessable in Australia(see the questions on employment income concerning leave and salary and wages below).

Your Australian tax obligations will otherwise generally remain unchanged.

You may need to lodge an Australian tax return if you become an Australian resident for tax purposes.

As an Australian resident all Australian-sourced income, including salary or wage income and investment income, will be assessable.

All foreign-sourced income will also be assessable unless you are an Australian resident who is a temporary resident.

Question: Will my tax residency for tax purposes change as a result of me returning to Australia due to COVID-19?

Answer: Whether you are a resident for tax purposes in Australia is a question of fact that requires consideration of your circumstances.

If you are here temporarily for some weeks or months because of COVID-19 then you will not become an Australian resident for tax purposes as long as you:

• usually live overseas permanently
• intend to return there as soon as you are able to.

However the tax residency issue may be more complicated if you:

• end up staying in Australia for a lengthy period
• do not plan to return to your country of residency when you are able to do so.

We appreciate that there will be unique situations with a range of potential tax outcomes.

We will update and may revise this advice progressively as events unfold.

Question: What happens if I earn employment income that is paid leave while I am in Australia temporarily?

Answer: If you usually work overseas and earn foreign-source employment income and you have been on leave since arriving in Australia, the income you receive from your foreign employer for paid leave (such as annual or holiday leave) is not from an Australian source so you do not need to declare it in Australia.

Question: What happens if I earn employment income that is salary and wages from continuing my foreign employment (working remotely) while I am in Australia temporarily?

Answer: Whether employment income you earn is assessable depends on whether it is from an Australian or a foreign source.

It also depends on whether a double tax agreement applies (see the question on double tax agreements).

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The source of income always depends on the facts.

Usually the place where the employment is exercised is very significant when deciding the source of employment income (salary or wages).

However, in certain circumstances other factors may be more significant.

COVID-19 has created a special set of circumstances that must be taken into account when considering the source of the employment income of a non-resident who usually works overseas but instead performs that same employment in Australia as a result of COVID-19.

In this situation, we accept that, if the working arrangement is short term (three months or less), the employment income will not have an Australian source.

For working arrangements that last longer than three months, all your facts and circumstances will need to be examined to determine if your employment is connected to Australia.

This includes whether:

• the terms and conditions of your employment contract change
• the nature of your employment activities change
• you commence performing some work for an Australian entity affiliated with your employer
• the economic impact or result of your work shifts to Australia
• your economic employer – the entity to which you are providing your services – is in Australia (see Taxation Ruling TR 2013/1)
• you perform work with Australian clients
• the performance of your work is otherwise wholly or to a significant degree dependent upon you being physically present in Australia to complete it
• Australia becomes your permanent place of work
• your intention towards Australia changes.

In some limited situations your employment income may not have an Australian source.

This may be the case if all of the following apply:

• The only thing that has changed about your employment is that you are now doing it from Australia as a result of COVID-19.
• There are no other connections to Australia.
• You intend to leave Australia as soon as you are able to do so.

Question: What if I get a wage or salary in Australia and my home country has a double tax agreement with Australia?

Answer: Australia’s double tax agreementsExternal Link (DTA) provide that, in certain circumstances, employment income derived by a person who is a resident of the other country (after applying the DTA tie-breaker rules) from performing employment duties in Australia for a short period will not be taxed in Australia.

Each DTA must be checked carefully as the wording, conditions and time periods vary from DTA to DTA.

Generally, employment income will not be taxed in Australia if:

• you are a resident of a country with which Australia has a DTA (the DTA country)
• you are not present in Australia for more than 183 days in aggregate in either an income year or a 12-month period (depending on the applicable DTA)
• your salary and wages are paid to you by, or on behalf of, an employer that is not a resident of Australia
• your salary and wages are not deductible against the profits of an Australian permanent establishment of your employer.

For some DTAs, the 183 days do not necessarily all have to be in the same income year, and there may be breaks in the aggregate.

Note: This is not Financial or Taxation Advice, but was sourced from The Australian Taxation Office. Find out what support is available, including JobKeeper payments, early release of superannuation and minimum drawdown rate options at the ATO Website