Employee COVID-19 testing expenses: Welcome tax relief confirmed

In our February 2022 TaxEd Update, we covered the tax issues related to employers providing or reimbursing costs related to employees taking COVID-19 tests (PCRs , Rapid Antigen style tests, etc).

In that article, we flagged problems whereby FBT potentially could apply however noted the Prime Minister had made comments indicating the Government would move to ensure COVID-19 testing costs would be tax deductible and not subject to FBT.

The good news is that Assistant Treasurer has now formally confirmed (see  the Government announcement of 8 February 2022 – click here) that test expenses will be tax deductible where “…purchased for work related purposes” and not subject to FBT.

The ATO has also confirmed the proposed Government treatment.

Whilst the precise scope of the Government announcement remains to be seen (for example does it extend to travel costs related to testing/procuring tests etc), this development is most welcome and should allow employers to proceed with certainty in relation to their 2022 and 2023 FBT compliance. The Government announcement confirms the treatment will apply from the beginning of the 2021/22 FBT year and continue indefinitely.

Unfortunately though, this issue highlights weaknesses with the FBT law. The prospect that an employer providing, for example, daily or weekly RAT tests to employees could even possibly be subject to FBT without Government action is a real concern.

This article provides a general summary of the subject covered and cannot be relied upon in relation to any specific instance. It is not intended to be, nor should it be relied upon as, a substitute for professional advice. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use.