PCR and RAT tests to be tax deductible & FBT free

The Treasurer has announced that PCR and rapid antigen tests (RAT) will be tax deductible for individuals and exempt from fringe benefits tax (FBT) for employers if purchased for work purposes.

There has been confusion over the tax treatment of RAT tests with the Prime Minister stating for some time that they are tax deductible, but in reality, the tests were probably only deductible in limited circumstances.

If you have had to purchase RAT tests to be able to work, you will be able to receive a tax deduction for the cost you have incurred from 1 July 2021. If the RAT test cost $20, someone on a marginal tax rate of 32.5% would receive a tax benefit of $6.50.

If you purchase Covid tests in order to run your business, you can now claim a tax deduction. This will apply most often to Rapid Antigen Tests (RATs) as PCR testing is at this stage government funded.

The deduction applies only for work related purposes. That is, the cost of testing other household members, including children, is not eligible.

If you have already purchased and used Covid tests but no longer have the receipts, you will need some alternative record.

This could include bank or credit card statements, or a detailed written diary entry showing what you purchased, where, when, and how much you spent.

If you are running a business, Covid tests will be Fringe Benefits Tax (FBT) exempt. Please also note that GST applies to the purchase and sale of RATs.

As this measure has only just been announced we will update this article as more information becomes available.

Legislation enabling the change is expected before Parliament this month.

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