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Covid RAT tests to be tax deductible

Govt decision to shut RAT tax traps covers both Australian individuals and small businesses

The National Road Transport Association (NatRoad) has welcomed the federal government’s decision to make Covid-19 tests tax deductible for individuals and to exempt businesses from fringe benefit tax (FBT).

The changes are expected to take effect from the 2021-22 FBT and income years and will be backdated to July 1, 2021.

The move follows NatRoad’s recent call to the Australian Tax Office to urgent clarify the tax-deductibility status of Rapid Antigen Tests (RATs), adding that the conflicting information is confusing small to medium businesses and adding to uncertainty about living with Covid.

“We have advocated for free Rapid Antigen Tests for road transport workers in line with our sector’s status as an essential industry and while this decision doesn’t go that far, this will provide some welcome relief,” NatRoad chairman Scott Davidson says.

“RATs and PCR tests are vital tools for road transport businesses to protect their workforce and to keep supply chains operating.

“We question why it didn’t happen sooner, as this issue was flagged publicly with the ATO a month ago and there’s every chance some individual drivers won’t have retained their proof of purchase.”

The amendments to tax law are expected to be put before the Parliament this week.

Davidson says the changes will erase doubts that tests taken before an employee starts their working day will be tax deductible.

“That has certainly been a concern for many owner drivers.

“We understand that the FBT exemption will apply if tests are purchased by a business for work-related purposes and distributed to employees.”

Small businesses will reduce their FBT liability by $20 for every dual pack of RATs purchased for $20 and provided to employees.

Meanwhile, Australians earning an income taxed at 32.5 per cent will receive a tax refund of about $6.50 for every pack of two RATs purchased for $20.

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