COVID-19 continued to be a challenge for individuals and businesses in 2021/22. Many grants and rebates were provided through state governments to support individuals and businesses financially recover from the effects of the pandemic. There are some COVID-19 specific rules applicable for 2021/22 tax return.
Here are some of the changes in terms of tax returns more commonly applying to individuals and sole traders.
1. Low-Income Tax Offset and Low-and-Middle-Income Tax Offset!
Low-income tax offset will continue to be available for 2021/22. Full low-income tax offset of $700 will be available for taxable income of $37,500 or less.
The Low-and-Middle Income Tax Offset has been increased by $420 for the 2021/22 income year. The base amount for the 2021–22 income year has increased to $675 and the full amount is $1,500.
Please note that these are non-refundable tax offsets and this can only reduce the amount of tax on taxable income. Further, this offset will automatically be calculated based on the income level and individuals and sole traders don’t need to complete any section in their tax return to get this offset.
2. Tax rates and tax threshold
Tax rates and tax thresholds remains the same as 2020/21.
3. Taxation of COVID-19 payments
COVID-19 disaster payment
If you received COVID-19 disaster payment during 2021–22 because you could not continue your usual employment due to any of state or territory health orders, such payment is exempt from income tax and you do not include such payment in your tax return.
Pandemic leave disaster payment
If you received pandemic leave disaster payment because you had to self-isolate, quarantine at home or care for some one with COVID-19 and as a result unable to earn, such payment is taxable and you need to include it in your tax return.
4. Working from home
Temporary ‘short-cut method’ for working from home continues to be available for 2021/22 income tax return. The short-cut method allows deduction at 80 cents per hour for every hour worked from home.
For further details on working from home rules, you can refer to our post on ‘working from home rules’; here is the link.
https://accountinghands.com.au/2019-20-tax-return-new-working-from-home-rules/
5. Deduction for COVID-19 tests
If you had to do COVID-19 test for work related purposes in 2021/22, for example to determine whether you could remain at work, you can claim deduction for such costs in your 2021/22 tax return. The cost can include cost of PCR or rapid antigen (RAT) test.
In order to claim a deduction you must have record to prove that you incurred the cost and you were required to take the test for work purpose.