COVID-19 impacting taxes

Taxpayers should be aware of changes in circumstances that may affect what needs to be included as income and what can be claimed as a deduction. (iStock)

The Australian Taxation Office (ATO) is anticipating that COVID-19 will continue to impact the income and deductions reported by taxpayers this tax time.

“We know that many have faced significant challenges this year, and the ATO is here to help you get your tax right the first time,” says ATO assistant commissioner Tim Loh.

Taxpayers should be aware of changes in circumstances that may affect what needs to be included as income, as well as what can be claimed as a deduction. These changes include receiving an income support payment and changing what can be claimed as a work-related expense.

“Tax time can be a smooth and easy experience if you know what income you must include and what COVID-19-related expenses you can claim in your tax return,” Mr Loh says.

From July 1 2021, taxpayers who paid for a COVID-19 test for work-related purposes, such as to determine whether they can attend or remain at work, are now able to claim a deduction for the test. Taxpayers must have a record to demonstrate that they paid for the test – usually a receipt or invoice, though a bank or credit card statement or evidence from your employer can also be provided.

Taxpayers are not able to claim for a test that was provided by their employer, or if their employer reimbursed them for the cost, and only tests that are required for work-related purposes can be claimed.

“If you purchased a COVID-19 test for a trip with your mates, you can’t claim a deduction,” says Mr Loh.

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

“If you’re spending your working day in close proximity to customers and at risk of contracting COVID-19, you may be able to claim a deduction for protective items such as gloves, face masks or sanitiser,” Mr Loh says.

“This will be most common in industries such as retail, cleaning and hospitality.”

Taxes on different payments

JobSeeker payments are taxable. This information will be automatically pre-filled in tax returns at the Government Allowances and Payments label when it is ready. If taxpayers choose to lodge before this information is filled, it will need to be proved manually. Leaving income out of your tax declaration will delay your tax return being processed.

The Pandemic Leave Disaster Payment is also taxable. It must be included in tax returns for the income year that the amounts were received. Services Australia provided recipients with a letter each time they received a payment. The sum of these payments will need to be manually added into your tax return and will not be pre-filled.

“While the information isn’t prefilled for you, not adding Pandemic Leave Disaster Payments to your tax return will delay the processing of your return and your potential refund,” Mr Loh says.

The federal government’s COVID-19 disaster payment, delivered through Services Australia, is not taxable and does not need to be included in tax returns.

For more information, contact your registered tax agent or visit the ATO website at