What are the FBT implications for RAT tests?

Are you providing free Covid tests for your employees? Make sure you are across potential FBT implications coming up to FBT year end.

Providing free Covid testing for your staff is a proactive and sensible measure to ensure you are keeping the workplace safe, however clients should be aware that doing so may result in potential tax implications for Fringe Benefits Tax (FBT) year end on March 31.

Recently, clients have been asking what the tax impact is for provision of RAT or PCR Covid-19 tests for their employees. This is a great question, and the federal government has recently provided updated guidance on this as of the 7 of February 2022.

In a nutshell:

COVID 19 test expenses incurred by individuals will be tax deductible where they are purchased for work related purposes — this applies both when an individual is required to attend the workplace or has the option to work remotely; and 

employers will not be liable for FBT if they provide COVID-19 testing to their employees for work related purposes

You can read the full address from the Hon Josh Frydenberg MP here

I have already incurred expenses, when will the policy take place? 

The change to the law to make testing costs deductible will apply from 1 July 2021 (from the 2021–22 income year), and the change to make the tests exempt from FBT will apply from 1 April 2021 (from the 2021–22 FBT year). Importantly, these changes to the law will be in place permanently. 

How will the new policy be rolled out? 

It is important to note that while it is very pleasing to see the proposed changes, the ATO are responsible for administering the changes and issuing guidance material on the new rules. The ATO acknowledged on 8 February 2022 that guidance material will be updated as necessary once the measure is enacted. In the meantime you should be aware of the following: 

• An amending bill is required to be introduced to Parliament which will contain further details
• The bill will need to be passed before the election is called to give taxpayers any certainty
• ATO guidance is yet to be updated

We will update this article and advise clients on further updates to the FBT exemptions legislation for Covid-19 tests as we hear more.

In the meantime if you have any questions regarding FBT and Covid testing, please do not hesitate to get in touch.