RAT and PCR tests to become tax-deductible

Additionally, this will also mean fringe benefits tax will not be incurred by employers if they provide COVID-19 tests to their employees for this purpose.

Treasurer Josh Frydenberg’s clarification follows concerns raised by industry leaders on the issue of tax implications surrounding COVID-19 tests, calling on the government to update legislation and remove additional obligations for businesses.

Although the new measures are not yet legislated, the Australian Taxation Office is preparing to provide more detailed advice in the coming weeks and has suggested that in the interim businesses that have incurred expenses in relation to COVID-19 tests should keep a record of those expenses.

Under the updated set of tax rules, both PCR and RATs will be covered, and the scheme will be backdated to include the entirety of the 2021-22 financial year.

In practical terms, a small business would reduce its FBT liability by about $20 for every dual pack of RATs purchased for $20 and distributed to employees.

These decisions will require a reworking of existing legislation, and have not yet received bipartisan support (the ALP has committed to make such tests available to businesses free of charge).

Mr Frydenberg told business leaders on Monday (7 February) that it was “time to draw some clear lines in the sand”.

“Of course, we will face ongoing challenges, of that we can be certain – workforce shortages, supply chain disruptions, and the return of higher inflation,” he said.

“In tackling these issues, we must also have an eye to the future to ensure we continue to build a stronger and more productive economy. 

“I’m announcing that we will ensure that COVID‑19 testing expenses are tax deductible for testing taken to attend a place of work, giving businesses and individuals more clarity and assurance.

“We will also ensure that fringe benefits tax will not be incurred by employers where COVID‑19 tests are provided to employees for this purpose.”

The government also on Monday (7 February) announced the opening of international borders to tourists from 21 February and Mr Frydenberg said this will help further relieve workforce pressures.