Australian women could be in for a bigger than usual tax refund this year but will they make the most of work-from home deductions?
Tax experts say that because women have been hardest hit by covid-19 related job cuts and reduced paid work hours, that many may find that the drop in their income could result in a bigger tax refund as lodging a tax return is essentially a reconciliation process.
“Tax is deducted from wages based on an estimate of annual earnings, so the [reconciliation process] is simply a function of the difference between what was estimated they would earn in a year compared to what they did actually earn,” said Curtin University’s Professor Helen Hodgson.
For instance, if a woman was supposed to earn $40,000, but lost her job in March and went on JobKeeper, her end of financial year income may be significantly reduced and her tax bracket changed to reflect lower earnings. This may result in her having paid more tax than she needed to and potentially a tax refund.
While everyone loves a tax refund, there is much more to actually getting one and maximising your chances in a COVID-19 work from home world.
So far we know that women are more likely than men to have been working from home in the period between late April and early May, Australian Bureau of Statistics data shows.
But this doesn’t necessarily mean that women will be making the most of work-related deductions. In fact behavioural traits may get in the way.
“Behaviourally I find men are more aggressive at tax time and are more likely to claim more in tax deductions and take more risk whereas women are more likely to be more conservative with tax claims,” said AMP financial adviser Andrew Heaven.
Various studies have highlighted the different risk tendencies of the genders in respect to finance, including when it comes to tax deductions with men often claiming much more.
The Australian Tax Office has been bracing itself for an increase in work-related tax deductions and has simplified the rules around work-from-home claims to assist people in making claims for expenses not otherwise covered by their employer.
The ATO has outlined that employees can claim their at-home work expenses in one of three ways.
The new shortcut method allows workers to claim 80 cents per hour for phone, internet, home energy and decline in value of equipment and furniture. This method is expected to be most popular with those who are new to working from home arrangements.
The fixed-rate method enables individuals to claim 52 cents per hour on work-related running costs, such as air conditioning, lighting, cleaning and the wear of office furniture, plus calculating specific costs for phone, internet, stationery and decline in value of equipment.
The actual cost method, which enables workers to claim the work-related portion of all work-related expenses, which must be recorded and calculated by them.
Helen Baker who is also a financial advisor and money.com.au spokesperson, says there’s a risk that many women won’t be making as many claims for work-related deductions as men.
“They may be feeling more overwhelmed because of the pandemic, especially if they are doing a lot more paid and unpaid work than ever before,” she said.
“They might even just say to themselves; I have so much going on looking after my kids, that I can’t be bothered making the claim. It is just another thing to do. I think that is the bigger risk for women and that they just say to themselves, forget it.”
Of course, being eligible for certain tax deductions right now doesn’t depend on your gender. What matters is your occupation.
“People may be eligible for a slightly larger refund this year if their expenses increased because they started working from home or they had to buy personal protective equipment for work use,” said Professor Hodgson, adding that unfortunately there are no deductions for "homeschooling your kids."
The general rule is that you can claim up to $300 for small items for work-related deductions, expenses above that such as laptops would need to be depreciated.
“If you are incurring the expense as a result of generating work or income then that is okay, but if it is a discretionary expense that you would otherwise incur yourself, then the ATO won’t be cool with that,” said Heaven.
“Personal expenses like food and drink such as coffees can’t generally be claimed.
“Also if you went and bought a realm of paper to help the kids be homeschooled, that is not a work from home expense.
“The other one you would need to be really careful of is if you are already being reimbursed by your employer then you can’t claim for those items and if for example, you have salary packaged a laptop then you can’t claim the laptop either,” said Heaven.
Bianca Hartge-Hazelman is the author of the Financy Women’s Index and founder of women’s money website financy.com.au. She is also a proud contributor and supporter of Yahoo Finance’s Women’s Money Movement.