Advice on COVID-19 deductions

The office said that taxpayers need to be aware of changes in circumstances that may affect what needs to be included as income or what can be claimed as a deduction. Among the most common changes for taxpayers include receiving an income support payment and changing what can be claimed as a work-related expense.

Taxpayers and their registered tax agents affected by COVID-19 or financial hardship can access support at ato.gov.au/coronavirus

COVID-19 work-related expenses

From 1 July 2021, taxpayers who paid for a COVID-19 test for work-related purposes (such as to determine if they can attend or remain at work) can now claim a deduction for the test.

Taxpayers must have a record to demonstrate that they paid for the test, a receipt or invoice is usually best. If there isn’t a receipt or invoice, reasonable evidence is documentation that shows the cost of the test and the requirement to take it for work purposes. For example, a bank or credit card statement or evidence from an employer can be provided.

Taxpayers cannot claim for a test that their employer provided or if their employer reimbursed them for the cost. Only tests that are required for work-related purposes can be claimed.

Taxpayers may be able to claim a deduction for the cost of protective items that protect against risk of illness or injury while performing work duties.

Taxpayers who are spending their working day in close proximity to customers and at risk of contracting COVID-19, may be able to claim a deduction for protective items such as gloves, face masks, or sanitiser. This will be most common in industries such as retail, cleaning and hospitality.

Visit protective items, equipment and products for more information.

Tax treatment of different payments

JobSeeker

JobSeeker payments are taxable. This information will be automatically prefilled in tax returns at the government allowances and payments label once it’s ready. If taxpayers choose to lodge before this information is prefilled, it will need to be added manually. Leaving out income will delay the tax return from being processed.

COVID-19 disaster payment for people affected by restrictions

The Australian government’s COVID-19 disaster payment (delivered through Services Australia) is not taxable. It does not need to be included in tax returns.

Pandemic Leave Disaster Payments

The Pandemic Leave Disaster Payment is taxable. This payment needs to be included in tax returns for the income year the amounts were received. Services Australia provided recipients with a letter each time they received a payment.

Those who received the Pandemic Leave Disaster Payment will need to manually add up all the amounts received and include the total amount received in their tax return. This payment won’t be prefilled into the return.

Taxpayers who chose to use a registered tax agent should remember to let their registered tax agent know they received the Pandemic Leave Disaster Payment.

The tax treatment of assistance payments can vary. The ATO website has a quick guide to the tax treatment of the various COVID-19 payments.