[Updated April 19, 2023]
Having COVID is stressful, but it’s equally nerve-wracking if you suspect you have caught it. The only way to alleviate your worries is to be tested. Although Polymerase Chain Reaction (PCR) tests are free to take because they are government-funded, Rapid Antigen tests (RATs) are not that cheap and not too easy to come by. The good news is that the Australian Government is offering some relief for individuals and businesses when it comes to their COVID-related expenses, which can be tax-deductible.
Are COVID Tests Tax Deductible?
The Federal Government announced on 7 February 2022 that there will be new legislation that makes COVID-19 testing expenses tax-deductible. It also includes all approved tests in the future. The legislation will not only focus on individuals but businesses, as well, provided that the tests will be used for work-related purposes. More specifically, RATs and PCRs (even though they are free) will be tax deductible for Australians. They will be exempt from Fringe Benefits Tax (FBT) for businesses.
Although recently declared, it’s not exactly new. COVID tests have always been tax-deductible. Under the general deduction provisions, Australians may be qualified for a tax deduction if they purchase a COVID-19 test as an out-of-pocket expense. This tax deduction, however, only applies to those who take the test for work-related purposes, such as per their employer’s COVID mandate.
In some instances, an employee is only allowed to enter a state, territory, or country or return to their home location. This will also be tax-deductible, specifically if the test is required for a trip relating to work.
Unfortunately, the Government has decided not to deduct taxes on RAT kits purchased for private reasons, including personal travel and convenience. It does not matter if the Government or state law requires a person to be tested. Tax deductions will strictly be applied to work-related COVID testing.
Only test kits bought in the 2021-22 financial year are claimable. The new legislation will be effective from the 2021-22 Fringe Benefits Tax and income years. Since it is backdated to 1 July 2021, all tests purchased after the mentioned date will be covered. Note that if you bought a test before 1 July, it would not be tax deductible, even if you took your test after the legislation took effect.
As always, you have to keep all receipts that prove you bought the test kit since COVID tests fall under the work-related expense category. So, have your receipts ready on your next tax return, along with substantiation showing that the test was due to a work requirement.
Remember that you can only claim a deduction if you bought the test on 1 July or later last year. If you lost your receipt, you might still be able to qualify for the tax deduction, provided that you have a detailed record of your purchase, like a diary entry written in English with information, such as when and where you bought the test and its cost.
Did You Incur Quarantine Expenses?
Quarantining is no longer required in many areas. However, suppose you must quarantine during or after travelling for work. In that case, you’ll be glad to know that the expenses incurred may be tax-deductible. That’s because the costs you paid for your quarantine, which include meals and hotel fees, are a part of your employment duties.
Meanwhile, if you are not travelling for work-related reasons, your quarantine expenses will not be tax-deductible, simply because they are undertaken as private in nature.
The following are also exceptions for claiming a tax deduction for quarantine expenses:
- If you are a Fly-In, Fly-Out employee, you most likely travel to work on a regular basis. These trips are probably not under your employer’s supervision and control. Therefore, you cannot claim a tax deduction if you have to quarantine whilst in transit.
- If you have just returned from a holiday, you cannot claim a tax deduction if you are required to quarantine before resuming work.
What about Your PPE Expenses?
You can claim a tax deduction for personal protective equipment, including face masks, face shields, gloves, sanitisers, goggles, and safety glasses. The condition is that you should incur the expense for these items. So, if your employer paid for them or provided the PPE for you, you cannot claim a deduction. The same rule applies even if you paid for these expenses, but your employer reimbursed you for the cost incurred.
Another important prerequisite for claiming tax deductions on PPE expenses is that the employer must require employees to be physically on-site. If you work from home, wearing a mask will not be tax-deductible. Also, if you are in close contact with customers, clients, and work colleagues and your employer requires wearing PPE, you may be able to claim a deduction.
Workers in industries like cleaning, airline, medical, and retail will usually qualify.
Did You Receive a Payment or Reward for Getting Vaccinated?
- Cash Payments: All cash payments, including those received for the purpose of getting vaccinated, should be declared under salary and wages in your tax return. Therefore, these cash payments will be taxable.
- Paid Leave: If your employee offers you a paid leave so you can get vaccinated, be aware that it counts as a payment. Therefore, it will be considered a part of your assessable income, just like other types of paid leave.
- Non-Cash Benefit: If you received a voucher, gift card, or anything other than cash from your employer, the good news is that it will not be taxable to you. However, your employer may be subject to Fringe Benefits Tax (FBT).
If you incurred transport expenses, including fare, fuel, and accommodation, to get to and come back from a specific COVID vaccination location, they would not be exempt from taxes. Even though the vaccination may be a requirement in your workplace, these transport expenses are regarded as private costs and are therefore non-deductible.
Claiming COVID-Related Taxes in Post-COVID Times
Given the changes in work arrangements due to COVID-19, many people may have new tax realities. That is because they may have to make different work arrangements that lead to new expenses. As a taxpayer, you can claim COVID-related taxes on work from home expenses. You can also claim on work-related COVID purchases such as RAT tests and personal protection equipment (PPE). However, the expenses must be a requirement for your work.
Covid-19 & Your Tax
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