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Making COVID-19 Testing Tax-deductible Backed By Accountants

Professional accountants and tax consultants have welcomed the federal government’s decision to make COVID-19 testing expenses taken to attend a place of work tax-deductible. Also, the Fringe Benefits Tax (FBT) will not be incurred by employers where COVID-19 tests are provided to employees for work purposes.

Mr Josh Frydenberg, Treasurer, Australian Industry Group, confirmed the federal government would look to ensure all coronavirus testing expenses incurred at the workplace are tax-deductible. This move will greatly help businesses and employees in managing their costs of COVID-19 compliance.

He also said that, the Government had kept more than 80 million Rapid Antigen Test (RAT) kits to detect the infection ready for delivery in January and February to old age homes and other high-risk settings. All necessary actions are being taken to remove the uncertainty around the tax treatment of coronavirus tests.

CPA Australia open heartedly welcomed the move on RATs called for in its budget submission. The senior manager tax policy, CPA Australia, Ms Elinor Kasapidis, said, “We welcome the decision to make RATs tax deductible and FBT exempt.”

Though this is a great decision, there are a few traps that all practitioners must warn their clients about. It doesn’t give complete freedom to businesses for purchasing RATs on the government’s dime. There are several eligibility criteria and steps all businesses and employees still need to jump through to access this tax relief.

If you are relying on a tax agent, make sure they take reasonable care to ensure a RAT deduction or FBT exemption is valid. The tax deduction should be lodged as per the size and nature of the business, otherwise it may seem unreasonable. The Australian Taxation Office is working on all catching even minor errors and is on high alert of detecting unusual RAT expense claims. ATO will soon issue its guidance for tax deductible Covid-19 testing.

The decision will take into effect all testing transactions dated back to 1 July 2021. Business clients need to have records to substantiate their claims, but the employees need not have to hold onto the receipts.

One drawback of this decision is that this tax deduction won’t provide a dollar for dollar refund of the cost of purchasing the RAT, so the employees will still be out of pocket.

Now, the wait is on for detailed guidelines issues for by the ATO for the cost of procuring RAT’s for both employers and employees. If you are looking for a registered tax accountant in Geelong to take you through the process, KPG Taxation is here to assist you.