For TAX clients:

This is an important updates on Tax Deduction for FY22 to taxpayer. Before you lodge  your tax return with ATO you should need to consider following tax deduction updates.

Overview of key changes in Tax Returns: 

1. No Capital gain on Granny flat arrangements and CGT
2. COVID-19 Disaster payment is exempt from Income tax.
3. Claim a deduction for costs incurred for COVID-19 test expenses.

For more information please download the below link.

Capital gain on Granny flat arrangements and CGT

Since 1 July 2021, capital gains tax (CGT) does not apply when a granny flat arrangement is created, varied or terminated. A granny flat agreement is a written agreement that gives an eligible person the right to occupy a property for life.

The CGT exemption only applies if all of the following apply:

• the owner or owners of the property are individuals
• one or more eligible people have an eligible granny flat interest in the property
• the owners and the people with the granny flat interest enter into a written and binding granny flat arrangement. This arrangement must not be commercial in nature.

Normal CGT rules apply if there is no granny flat arrangement or if you are doing something other than creating, varying or terminating a granny flat arrangement.

COVID-19 payments:

If you received a COVID-19 disaster payment during 2021–22, because state or territory health orders prevented you from working in your usual employment:

• that payment is exempt from income tax, and
• you do not include the payment in your tax return.

If you received a pandemic leave disaster payment during 2021–22, you must include it in your tax return as income. These payments were made to eligible individuals who were unable to earn income because either:

• they had to self-isolate or quarantine at home
• they were caring for someone with COVID-19.

Services Australia has told you, or will tell you, the amount that you received.

Deduction for COVID-19 tests

You can claim a deduction in 2021–22 for costs you incurred for COVID-19 test expenses. This is if you used the test for a work-related purpose, such as to determine whether you could attend or remain at work. The test can be any test in the Australian Register of Therapeutic Goods, such as a polymerase chain reaction (PCR) test or rapid antigen (RAT) test.

To claim a deduction, you must have records to prove that:

• you incurred the cost (usually a receipt), and
• you were required to take the test for work purposes.

You can also claim a deduction for the cost of a COVID-19 test if you required the test to undertake travel away from your home overnight for work purposes.

Claim only the work-related portion of your expense on COVID-19 tests. For example, if you buy a multipack of COVID-19 tests and use some for private purposes – such as for other family members or for leisure activities – you may claim only the portion of the expense you used for a work-related purpose.

You can’t claim a deduction for the cost of a COVID-19 test if:

• you used the test for private purposes, for example to test your children before they returned to school
• you worked from home and did not intend to attend your workplace
• your employer provided the test or you were reimbursed for the cost of the test.

You can’t claim the cost of travelling, or of parking, to get a COVID-19 test.

For deductions you can claim if you were travelling for work and had to quarantine, see Quarantine and testing expenses when travelling on work.