Update: The Federal government has announced it will make COVID-19 tests tax-deductible for Australian individuals and exempt from fringe benefit tax (“FBT”) for businesses when they are purchased for work-related purposes. We are currently updating our article below to bring you the latest information.
In the race for Covid Rapid Antigen Tests (RATs), many are calling for government clarity on RAT tax treatment for businesses. Many employers are now reliant on getting their staff Covid tested for work but there is still confusion as to the tax implications of doing so via RATs.
RAT Tax Treatment: Tax Commissioner Push
The Federal Government recently confirmed the tax deductibility of RATs, however did not explain how the tax deduction could be claimed. So, in a bid for clarity, industry groups have pushed the Tax Commissioner to explain if employers and employees can claim RATs as legitimate working expenses for tax purposes. Further, businesses are seeking clarification as to whether the costs of RATs would bear any fringe benefits tax (“FBT) implications.
What We Know about RAT Tax Treatment: Individuals
RAT tax treatment for individuals currently differs from the tax treatment for businesses. While The Australian Taxation Office (“ATO”) has yet to confirm, under current legislation, RAT kits purchased by individuals for private purposes (personal travel, convenience, no access to PCR testing) will not be tax-deductible unless the law is changed to specifically allow a tax deduction for private RAT kits. If they are purchased by an individual for work purposes however, there are two perceivable ways RATs could be treated in the taxation of individuals.
As an individual taxpayer, you may qualify for a tax deduction for a RAT where you’re mandated by your employer to take a test before undertaking work. However, the ATO may take the view that a RAT taken prior to commencing work is ‘not on work time’ or ‘preliminary’ to the workday and as a result, would not be tax deductible.
What We Know about RAT Tax Treatment: Businesses
RAT tax treatment for businesses is currently quite confusing.
In terms of what should happen, if an employer incurs expenditure providing RATs to employees, the cost should be a tax-deductible business expense. This is because the expense will be necessarily incurred in carrying on the business; as the employer has a duty of care to safeguard employees in their workplace.
But here comes the ‘however’. Where the employer provides RATs at no cost to employees, this may be the provision of a fringe benefit and so, be subject to Fringe Benefits Tax (“FBT”).
Conclusion on Confusion: Get Professional Tax Advice
If this issue of confusion relating to RAT tax treatment has highlighted anything, it’s that you should always seek professional tax advice and try to stay up to date on tax topics pertinent to the Covid Pandemic. We at The Quinn Group offer tailored tax advice as well as weekly EAlert newsletters highlighting key dates and developments. Our team of experienced Tax Accountants can keep you updated and informed, as well as prepare your tax return, accommodating all the constantly changing rules relating to Covid-19.
If you need help or would like assistance in relation to RAT tax treatment and other tax issues, contact our team of experienced tax accountants. You can submit an online enquiry or call us on +61 2 9223 9166 to arrange a teleconference or appointment.
We also offer a free weekly EAlert newsletter providing up to date information on any relevant developments in the tax and legal world. Contact us to sign up today.