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Insight

COVID-19 rapid antigen tests now tax deductible

The Australian Government announces Rapid Antigen Tests will be made tax deductible for employees who need to take them to attend work and businesses purchasing the tests for employees will also be exempt from the fringe benefits tax.

RAT tax deduction

If you and/or your staff are required to prove you are COVID-free to run your business or attend work, the Australian Government is now allowing you to recoup some of that cost at tax time. A tax deduction is now available to Individuals, and this also means the fringe benefit tax will not be incurred by employers if they provide COVID-19 tests to their employees for testing taken to attend a place of work.

As with most government legislatures, this new deduction isn’t completely straightforward, so here is a handy guide to tax deductions and exemptions for COVID-19 rapid antigen tests:

  • The amount an individual will get back is calculated by their tax rate. For example, someone earning an income taxed at 32.5 per cent will receive a tax refund of about $6.50 for every pack of two RATs purchased for $20.

  • For small businesses, the total cost of the test is exempt from FBT. For example, a small business will reduce its FBT liability by $20 for every dual pack of RATs purchased for $20 and provided to employees.

  • Only COVID-19 tests you purchase for work-related purposes are tax deductible.

  • Any test that has been bought in the 2021/2022 financial year can be claimed. The legislation will be in effect from the 2021-22 FBT and income years and will be backdated to July 1, 2021.

  • In order to claim your COVID-19 tests, you’ll need to follow the same steps as any other work-related expense.

  • This means you’ll need to keep some form of record to prove that you spent money on it (like a receipt).
    • For tests you might have bought since July 1 last year and discarded the receipt for, you can still claim it as long as you have some form of record, such as a written diary entry that shows what you purchased, when, where, and how much you spent, and must be in English.

While DFK Laurence Varnay welcomes this news, there are a few traps to avoid when it comes to eligibility for these deductions and exemptions. If you’d like advice on how to navigate the legislature and successfully claim your RATs, talk to our team today.

 Faizal Ajmat

About the author

Tony Nguyen is a natural-born leader, with a strategic, perceptive and methodical approach to providing effective accounting and tax solutions. Whether they be small, medium or large businesses, Tony supports his clients with services ranging from the highest level tax and business advice, to payroll and bookkeeping, and helping develop business across Australia and beyond.

Tony became a Director of DFK Laurence Varnay in 2017 and is a valuable addition to the team. With his high attention to detail, strong business sense and people-oriented nature, Tony builds trust with clients to become their trusted adviser through all stages of their business and financial journey.

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