The changes apply to both businesses and individuals, and deductions can be backdated.
The federal government has announced that covid tests will become tax deductible for individuals and exempt from fringe benefit tax for businesses if tests are purchased for work-related purposes.
Deductions are processed at tax time along with your usual tax affairs, and the amount individuals get back depends on their tax bracket. If your income is taxed at 32.5 per cent, you’ll receive a tax refund of about $6.50 for every pack of two RATs purchased for $20.
For businesses, the fringe liability tax amount will decrease by $20 for every two-pack of RATs purchased and provided to employees for work purposes.
The catch? Only covid tests that you’ve purchased in order to safely return to work are tax deductible. So, if you need a negative result to go back to work in your office and you buy tests for your entire household to do, you can only receive a rebate on the tests that are used to prove you’re safe to work.
The legislation is backdated, so any tests purchased and used for this purpose from July 1, 2021 are eligible. To claim your tests, you'll need to follow the same steps as any other work-related expense at tax time.
So you’ll need to have a record such as a receipt, a written diary entry or some form of written correspondence from your employer as proof of purchase, and as proof that the test was used for work-related purposes. Similarly to all tax deductions, the ATO specifies that records need to show what you purchased, when, where and how much you spent, and must be entered in English.
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