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.
This means that for every COVID-19 test you pay for in order to do your job or run your business, you will get some of that cost back at tax time.
Like most things relating to tax, it isn’t entirely straightforward, so here is all the information you need to get your RATs (rapid antigen tests) in a row come tax time.
How much do I get back?
The announcement covers both Australian individuals and small businesses.
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.
What kinds of tests are covered?
Only the COVID-19 tests you purchase for work-related purposes are tax deductible.
How accurate is your rapid antigen test?
Comparing three scenarios shows it’s about more than looking for lines.
Rapid antigen test.
So, while you may have bought and done a RAT to work on-site, any that have been used to test other household members such as your children are not eligible.
The announcement included both PCR and RATs, however at this stage PCR tests are fully funded by the government and are free to take.
The government said the legislation will include future medically approved tests as well.
Can I claim tests I’ve already bought?
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.
This means that any test purchased after July 1 will be covered, but not any bought before that day, even if you took the test in July.
But given the first rapid tests weren’t actually approved or even sold in Australia until September, it’ll cover any and all that were used to make sure people could go to work safely as the Omicron wave hit most of the eastern states over Christmas.
Do I need to hang on to my receipts?
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.
The ATO says that where a receipt of an expense is not possible, you can use a detailed record of the purchase in another form, such as a written diary entry.
The tax office says your record needs to show what you purchased, when, where, and how much you spent, and must be in English.
7th February 2022