Tax deductibility and FBT treatment of Covid-19 test expenses

After much speculation, the Government announced that Covid-19 tests, including Polymerase Chain Reaction (‘PCR’) and Rapid Antigen Tests (‘RATs’), will be both tax-deductible and exempt from FBT, broadly where they are purchased for work-related purposes.

As such tests are inherently private in nature, related to an individual’s health, expenditure on such tests would not generally be tax deductible.

This will require the introduction of new specific legislation (i.e., to clarify that work-related Covid-19 test expenses incurred by individuals will be tax-deductible or FBT exempt where employers provide the tests to their staff) which will apply both where an individual is required to attend the workplace or has the option to work remotely.

The Government intends that these changes take effect from the beginning of the 2022 income year and will apply permanently once enacted.

As legislation is unlikely to be passed before 2022 FBT returns are due, businesses will need to self-assess whether providing tests to employees are likely to incur FBT.  Formal work policies requiring employees to undertake tests in certain circumstances to protect other employees and the business under OHS legislation will help in providing an arguable position that providing such tests is not subject to FBT.

If you would like to discuss your business’ work-related expense for the 2022 financial year, particularly covid-19 related expenses, or require further information, contact your usual Mazars adviser or one of our specialists via the form below.

Brisbane – Jamie Towers

Melbourne – Evan Beissel

Sydney – Gaibrielle Cleary

+61 7 3218 3900

+61 3 9252 0800

+61 2 9922 1166

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Published: 16/03/22

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