Treasurer unveils COVID-19 tests will now be classed a tax deduction.

Yesterday (Monday, 7 February), Treasurer Josh Frydenberg provided a number of updates and announcements, including confirmation the federal government would look to ensure COVID-19 testing expenses are tax deductible when they are purchased for work-related purposes, giving businesses and individuals clarity and assurance.

Mr Frydenberg announced changes to the tax implications of rapid antigen tests (“RATs”) purchased by businesses and distributed to staff, effectively exempting the purchase of these tests from any Fringe Benefit Tax (“FBT”) obligations.

“COVID-19 tests are an important tool being used by businesses to protect their workforce and to ensure they can keep their doors open and our supply chains running,” said Frydenberg.

While this is a welcome decision, especially as case numbers continue rise in WA, businesses and employees need to be mindful there must be a nexus to work to claim this deduction or FBT exemption.  For example, a business purchasing RATs must buy an amount proportionate to the number of staff also considering numbers of staff working from home.

This is a tax deduction and not a rebate therefore the cash benefit of the deduction will be limited to the business tax rate ie if in a company, 25% or marginal tax rates if an individual.  That is, taxpayers will not get 100 cents in the dollar back for the cost of purchasing RATs, they will still be out of pocket.

It is important to note the legislation has yet to be enacted, however is expected to be backdated to 1 July 2021.  We will provide an update once passed.

If you require any further information please get in touch with us.