On 30 March 2022, both Houses of the Parliament of Australia passed the Treasury Laws Amendment (Cost of Living Support and Other Measures) Bill 2022 (Bill). The Bill comes after the Federal Treasurer announced in February 2022 on the intended deductibility of Covid-19 tests.
The Bill received Royal Assent on 31 March 2022 to allow an income tax deduction for an employee who incurs costs associated with testing themselves for the presence of Covid-19, on or from 1 July 2021, where:
- There is sufficient connection between the testing and the individual's ability to produce assessable income; and
- The costs incurred on Covid-19 tests for a Polymerase Chain Reaction (PCR) test Rapid Antigen Tests (RAT).
- The legislation does not include additional costs such as travelling and parking expenses to purchase a testing kit.
The legislation also applies to employees who cannot attend their work place and must work from home due to having contracted Covid-19.
The legislative indirectly facilitates the removal of FBT for employers who provide Covid-19 tests to employees for use before attending a the workplace.
Employers who provide Covid-19 tests to employees will receive a reduction in their FBT liability through the 'otherwise deductible rule'.
This is particularly helpful for employers who have implemented policies to encourage employees to regularly test for Covid-19 before attending a physical workplace.
Employers must comply with all FBT record-keeping requirements to satisfy the OWD rule. This may include a receipt of invoice for the tests provided to employees including the date of payment and a policy or other document to demonstrate that Covid-19 tests are required to attend a physical workplace or for other work related purpose.
