Are COVID Rapid Antigen Tests Tax Deductible?

The federal government has announced it will make all COVID tests tax-deductible for individuals and businesses. The announcement included both polymerase chain reaction (PCR) and rapid antigen tests (RAT), however, at this stage PCR tests are fully funded by the government and are free to the public. The government confirmed the legislation would include other future medically approved tests as well.

How can I claim?

Tests purchased to perform your job or run your business will be tax-deductible similar to any other work-related expense. Just like other work-related expenses, they are claimed in your personal or business tax returns to reduce your taxable income and therefore reduce your tax liability at tax time.

Like other work-related expenses, the expense must have been incurred to do your job or run your business and must be able to be substantiated with a receipt.

Can I claim COVID Tests for personal use or for other family members?

Any COVID tests purchased for personal use or the use of other family members (for example, for children to attend school) will not be eligible for a tax deduction.

How much do I get back?

How much you get back depends on your individual tax rate. For example, an individual earning $100,000 is taxed at 32.5%. Therefore, the individual would be refunded $16.25 or 32.5% of a $50 box of rapid antigen tests.

A company paying tax at 25% would be refunded $12.50 or 25% of a $50 box of rapid antigen tests.

Are travel COVID Tests Tax deductable?

If you are taking a COVID Test for business related travel, yes, these tests are tax deductable the same way as any other business-related expense.  If you are traveling for personal reasons the COVID Test is not tax deductable.

When can I claim?

Tax deductions can be claimed on any COVID test purchased from 01 July 2021 onwards.

What about Fringe Benefits Tax?

Fringe Benefits Tax (FBT) is a tax paid by employers for providing un-taxed benefits to employees. Rapid antigen tests provided to employees is a benefit provided to employees.

The federal government has also announced it has made rapid antigen tests exempt from FBT. Currently, several FBT exemptions may be utilised to reduce the FBT liability on businesses. For example, if COVID tests are used on the business premises, businesses can rely on the ‘property benefit exemption’. Benefits provided to employees and used on the business premises are exempt under this exemption.

The tests are exempt from FBT as work-related medical screening – and no FBT is payable – where both of the following apply:

• testing is carried out by a legally qualified medical practitioner or nurse, and
• testing is available to all employees.

If only some of your employees get COVID-19 tests, the tests are still exempt as long as they are offered to all employees.

If the tests you provide or reimburse do not meet these requirements, you may need to pay FBT unless the cumulative value of the tests provided to an employee during the FBT year is less than $300.

Need help navigating through the complexities of your financials?

Morrows will watch these changes closely and will share with you once the above announcements are converted into legislation. So stay tuned!

If you require any assistance or have detailed questions regarding any of the above, please get in contact with a member of our Morrows One Team.