Rapid antigen tests declared tax deductible for workers, slashing price to $6.50

The cost of rapid antigen tests will be slashed to $6.50, with the federal government set to make them tax deductible for workers.

Workers will be allowed to claim Covid-19 tests as a tax deduction in some circumstances from this year in a move that will slash the cost to around $6.50 for a single test for average earners.

The major announcement follows complaints that some workers were being forced to buy their own RAT tests to attend work at the direction of employers.

But under the changes you will also need to keep all of your receipts when you buy a rapid antigen test or a PCR test for overseas travel and be able to prove you need it for work purposes.

In other words, you won’t be able to claim every test you buy as a tax deduction unless you can prove you need to use it to attend work.

Currently the eligibility for tax deductions for RATs is incredibly narrow and only applies in rare circumstances. These changes clarify the rules and tax deductibility.

However, Australians will have to wait until the end of the financial year to claim the cash. It will only be payable after you lodge your tax return.

For thousands of Australians who bought up big on rapid antigen tests over the summer, you will need to find the receipts to claim in case you’re audited by the tax office.

Treasurer Josh Frydenberg will announce the big change on Monday as the Morrison government attempts to reset the debate after a summer of Omicron outbreaks and week of controversy over leaked text messages calling the Prime Minister “a complete psycho”.

“Covid-19 tests are an important tool being used by businesses to protect their workforce and to ensure they can keep their doors open and our supply chains running,’’ he said.

“That is why we will bring Covid-19 tests in line with other work-related expenses by making them tax deductible for individuals and FBT exempt for businesses.

“As the pandemic has evolved so has our response, and by making common sense decisions like this, we are making it easier for households and businesses to get on with their lives.”

“It is also in stark contrast to Labor that has committed to provide RATs for free on an ongoing basis, with an estimated ongoing cost of up to $13 billion per year that is simply unsustainable.

“But as all Australians know too well, that’s the Labor approach. Spend big and then increase taxes on hard working Australians to pay for it, leading to a smaller economy, fewer jobs and a weaker budget.”

Mr Frydenberg said the government would move to ensure that Covid-19 tests are tax deductible for workers and exempt from Fringe Benefit Tax (FBT) for businesses, where they are purchased for work-related purposes.

Any Australian that earn income can already deduct expenses directly incurred in earning that income such as a nurse purchasing personal protective equipment (PPE) for use while carrying out employment duties.

If your employer provides the PPE, masks or Covid tests, the good news is the employer would be able to deduct this expense from assessable income and it would also be exempt from Fringe Benefits Tax.

However, the ATO cautioned that in certain situations where Covid-19 tests are purchased and used as a preparatory step – for example testing by a retail worker before going into work), rather than for use while working and earning income, under the current law the expense may not be tax deductible.

If the employer provides the Covid-19 tests in this situation, the employer would be able to deduct this expense from assessable income, but it would be subject to FBT.

Business groups have been urging the Morrison government to clarify who can claim work-related Rapid Antigen Tests (RATs) as a legitimate working expense for tax purposes for weeks.

“While the Prime Minister earlier this month confirmed that RATs would be tax deductible, the circumstances in which this would be allowable remain uncertain,’’ Innes Willox, chief executive of the national employer association Ai Group, said last month.

“People travelling for work who require RAT tests or those who are directed to take RAT tests as a requirement for work are likely to be able to claim the costs of the tests against their tax. “However, that tax deductibility should be broadly available to those who use the RATs personally to ensure they are safe to attend work or move about the community.

“RATs are helping to keep our economy moving and a fair tax treatment for the costs of work-related RATs will support testing and help keep our workplaces and businesses safe.

“While governments have resisted calls to subsidise the cost of RATs, the tax system provides an easy way of defraying some of the costs for the workforce and business,” Mr Willox added.

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