RATs are now tax deductible! And no FBT.

As we move into living with COVID as the new norm, the Federal Government have finally caught up with the fact that PCR and rapid antigen tests (RATs) for COVID are becoming an everyday cost for individuals and employers.  The Government have announced a policy change to enable both employees and employers to claim the cost of tests as a tax deduction where the testing is undertaken to attend a place of work.

Changes to the law will be back dated to 1 July 2021 and will be a permanent change to the law.

What does it mean for individuals?

For employees, the cost of tests acquired for work-related purposes will be available to be claimed as a work-related expense in their income tax returns.  The usual ATO substantiation requirements to keep a record of expenses incurred and retain receipts will still be required.  Sole traders and partners in business are able to claim the costs of tests for work-related purposes as a business expense.

Benefits to employers

Employers can claim a tax deduction for supplying COVID testing to employees for work-related purposes.  Further, the expense will also be exempt from fringe benefits tax (FBT), with proposed changes to the law removing the previous requirement for work-related medical screening to be conducted by a medical professional.  This recognises the fact that the majority of testing is done by non-medical individuals at home.