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Tax consequences of the RAT race
Technical article

Tax consequences of the RAT race

In a previous article we discussed the tax treatment of purchases of COVID-19 Rapid Antigen Tests (RATs) and noted that the subject of deductibility and FBT consequences regarding the acquisition of these tests is likely to be an evolving space, as the Government grappled with the need to boost confidence in the economy.

Indeed, that has proven to be the case.

What has been clarified for individuals?

The Commonwealth Government has now announced new legislation, which will confirm the tax deductibility of COVID-19 test expenses where the test is purchased for work-related purposes.

A press release from the Assistant Treasurer states that the measure is effective from 1 July 2021 and applies both where an individual is required to attend a workplace or where there is the option of working remotely.

While we still await the definition of “purchased for work related purposes”, we recommend that receipts be kept for all tests purchased from the start of the current financial year (or attempt to obtain them, if you didn’t anticipate these costs would be deductible at the time of purchase).

What has been clarified for businesses?

From an employer point of view, the costs of supplying RATs for employee use already met the requirements for a tax deduction, as an employment related expense intended to provide a safe working environment.

However, we previously discussed that the existing exemptions from Fringe Benefits Tax (FBT) for businesses paying for medical screening of employees was problematic given that it was necessary that testing be administered by a legally qualified medical practitioner or nurse. Therefore, we welcome the Government’s announcement that legislation will also provide certainty that the payment for employees to undertake PCR or Rapid Antigen Testing for COVID-19 will be specifically exempt from FBT.

Where to from here?

The announced measures are not yet law and at the date of this publication, the content of the legislation has yet to be released. Given the impending suspension of Parliament for the upcoming Federal Election campaign, it is anticipated that the details will be made available in coming weeks. In the meantime, track down those RAT purchase receipts!

This content is general commentary only and does not constitute advice. Before making any decision or taking any action in relation to the content, you should consult your professional advisor. To the maximum extent permitted by law, neither Pitcher Partners or its affiliated entities, nor any of our employees will be liable for any loss, damage, liability or claim whatsoever suffered or incurred arising directly or indirectly out of the use or reliance on the material contained in this content. Pitcher Partners is an association of independent firms. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Liability limited by a scheme approved under professional standards legislation.
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