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On 7th February 2022, the government announced that COVID-19 tests will be tax deductible and exempt from Fringe Benefits 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 perform your job or run your business, you will be able to get some of that cost back at tax time. This includes individuals who are required to attend the workplace or have the option to work remotely.

Although the legislation is yet to be passed, the change will take effect from the beginning of the 2021‑22 tax year and will be in place permanently.

The government recognises that COVID‑19 tests are an important tool for mitigating transmission risks and reducing absences from the workplace.

How much will I get back at tax time?

The amount an individual will get back at tax time is dependent on their marginal tax rate.

For example, someone earning an income taxed at 32.5% will receive a tax refund of about $6.50 for every dual pack of Rapid Antigen Tests (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 and how are they claimed?

COVID-19 tests (both PCRs and RATs) purchased for work related purposes are tax deductible.

While you may have purchased a RAT to work on site, any that were used on household members such as your spouse or children are not tax deductible.

In order to claim your COVID-19 tests, you’ll need to follow the same steps as any other work related expenses. You will need to keep your receipts or hold proof that the RAT was purchased from 1 July 2021.

The ATO has confirmed that where a receipt of the expense is not possible, you can use a detailed record of the purchase in another form such as a diary entry as sufficient proof.

The record needs to show what you purchased, when, where and how much you spent in order for it to be an eligible record.

We’re here to help

Should you wish to discuss the impending legislation or would like assistance in understanding your tax claims for the year, please do not hesitate to contact us on 03 9808 7377 or via email.

Source: www.ato.gov.au

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