For most Australians, this tax time will be unlike any other.
If you’ve lost your job, had to work reduced hours due to COVID-19, or met other eligibility criteria, you may have received government assistance like JobKeeper, extra JobSeeker, or accessed some of your super early to help cover expenses.
So how will this new source of income affect your tax return—and do you need to disclose it?
JobKeeper payments (up to $1,500 per fortnight) will be treated the same way as wages or income. This means these payments will be taxed and must be disclosed in your tax return.
If you’ve received JobKeeper payments from your employer, those payments will be included as part of your income statement which your employer provides to the ATO. You can view this statement in your MyGov account or your tax agent can access it on your behalf.
Be aware that if you previously earned less than the JobKeeper amount, your income may go over the tax-free threshold.
For example, if your salary increases from $800 to $1500 a fortnight as of March 2020 because of JobKeeper, you may be required to pay more tax due to earning a higher income. On the flip side, you may also get a larger refund if you earn more money but still fall under the $18,200 tax-free threshold.
If you received a JobSeeker payment from Services Australia (previously known as the Department of Human Services), this amount will be taxed as regular income and will need to be included in your tax return.
The ATO should automatically populate this information for you under the ‘government payments and allowances’ section in your tax return. But it won’t necessarily be there from 1 July 2020.
If you find that this information is missing, you or your tax agent will need to populate it yourselves or complete your tax return once the information appears.
If your business received JobKeeper payments to help make up for a fall in turnover, you’ll need to disclose these payments as part of the assessable income of the business for the financial year.
The ATO is also allowing businesses to vary PAYG instalments if the business believes that the current rate is too high given the effects of COVID-19 compared to the previous estimated tax for the year.
Insurance, redundancy and leave payouts
Any payments you may have received because your income was disrupted —such as an income protection insurance payout, sickness, or accident insurance claim—must be declared in your tax return in the normal manner for such payments. This also goes for a redundancy payout and paid leave.
As the tax treatment of these vary, it’s best to follow the instructions that are provided against each of these items if you are completing your own tax return, and talk to your tax agent.
Early release of super
If you accessed part of your super under the COVID-19 early release of super payment, you won’t be required to pay any tax on the payment so you don’t need to disclose it in your tax return.
It may be worth discussing your government support payments with your accountant or financial adviser to make sure you get maximum benefit with minimal workload.
There are also some useful EOFY tax and financial planning tips available on the MLC website.
Article source – https://www.mlc.com.au/personal/blog/2020/07/tax_treatment_ofcov