Covid-19 blasting its way across the globe has meant many changes to the way people work as well as impacting the extra costs they’ve incurred because of changed working conditions. Further mandates have increased the need for PCR and RAT testing to ensure the virus is contained, however these costs can add up, especially if you’re out of pocket so you can earn an income.
PCR and RAT Tests
A recent announcement by the government to make PCR (Polymerase Chain Reaction) and RAT (Rapid Antigen Tests) tax deductible for personal income tax returns, and for the exclusion of fringe benefits tax (FBT) for businesses if these tests have been purchased for staff, is welcome. Tests must be purchased for work-purposes to qualify for tax deductions no matter if the employee is working from home or back in the workplace.
Where there is a mandatory requirement that tests be taken in order to work, these tests already qualified for a tax deduction. Where there is a requirement for an employee to enter another state or country and return to their home state or country for work purposes, these tests are already tax deductible.
Pro Tax Tip: If you’ve had to purchase a covid-19 testing kit but have used it for personal purposes, unfortunately those costs will not be tax deductible.
It’s important to understand that although these tests are tax deductible, an employee will not receive the whole cost of the test back. This is because of the way tax deductions work. The expenses lower your total taxa[ble income thus lowering the tax you have to pay, however the amount is not returned in full. Your tax return will depend on what your total taxable income works out to be.
For example, if a tax payer is taxed at a rate of 32.5 per cent, they will receive a tax refund of around $6.50 for the purchase of a $20 pack of RAT tests.
For small businesses, the full amount of the cost of the tests in terms of a fringe benefit exemption will be received. If a $20 pack of RAT tests have been purchase, the FBT exemption will be $20.
Pro Tax Tip: Only the PCR and RAT tests for Cobid-19 are covered. Future legislation may cover other Covid-19 tests, however that is still be to determined.
If you’ve bought a test for your work and this test has been used by a household member instead the cost can’t be claimed.
Any tests purchased in the 2021/2022 year can be claimed in personal income tax returns. Legislation will affect the 2021-22 FBT income years and will be backdated to 1 July 2021.
Working From Home Expenses
If you were one of the many employees who were asked to work from home, there’s no doubt that you’ve incurred extra household costs on your electricity, gas, heating, cooling and computers. You may have had to purchase a desk or computer chair to enable you to create a work space you wouldn’t normally have.
The Australian Taxation Office (ATO) brought in a short cut method of claiming these costs. A cost of 80 cents per hour you’ve worked can be claimed. This method includes all of your expenses in a ‘bulk’ format, however occupancy and extra capital costs can’t be claimed if you use this method.
The short cut method can be used if you worked from home between:
- 1 March 2020 to 30 June 2020 in the 2019-20 financial year
- 1 July 2020 to 30 June 20201 in the 2020-21 financial year
- 1 July 2021 to 30 June 2022 in the 2021-22 financial year
If you’ve had to quarantine for your employment either before or after a work trip and have incurred costs not reimbursed by your employer, for example hotel fees and meals, these costs are tax deductible because quarantine was undertaken for your work duty.
There are exceptions to this rule, which include fly-in-fly-out employees who must travel to a remote work site but are not under the supervision and control of the employer and where the need for quarantine was for private purposes such as taken for a personal trip or holiday.
Pro Tax Tip: If you’ve travelled and had to quarantine for private purposes, you cannot claim these expenses in your tax return even if the quarantine was mandatory.
Some employers offered cash or gift incentives to staff for vaccine uptake. Any income offered will need to be declared when you lodge your tax return. These incentives are seen as part of your taxable income, including gifts which will need to be worked out to a dollar value when you lodge your tax return.
Any paid leave taken to get a vaccination or to coalesce after receiving a vaccination will be taxed as normal because it’s counted as a part of your normal working allowances.
Non-cash benefits, such as a voucher or gift card will not be taxable to you personally, but your employer might incur FBT.
Pro Tax Tip: Any travel expenses incurred to get to your Covid-19 vaccination are considered to be a private expense, even if the vaccination is a condition of your employment.
Keep Your Receipts
As with any claimable tax deductions, you must be able to prove your expense. Keep your receipts and any other paperwork you have to prove your claims. In the case of PCR and RAT tests, the ATO has stated that where a receipt of an expense was not possible, a detailed record of the purchase in another form, such as a diary entry or signed contract will be acceptable. You’ll need to show what was purchase, when, where and how much was spent in English.