Australians can Claim Tax Deductions for COVID-19 Tests at Tax Time

As of 7th February 2021, Australia’s federal government announced it will allow tax deductions for COVID-19 tests. This also includes exemption from fringe benefits tax (FBT) for small businesses for work-related purchases.

In short, for every test purchased in order to ensure the smooth flow of your job or business, some of that cost will be reclaimable at tax time. This comes in addition to the working from home tax deductions that Australian citizens may claim.

Tax deductions for Covid-19 tests

According to the ATO Australian citizens will be able to retrieve costs back from both PCR and rapid antigen tests (RATs) as of now, but are looking to expand to more medically approved tests in the future.

The tax rate of each individual impacts the calculation of the amount they can claim. For example, if Sam’s income possesses a tax rate of 20%. He receives a tax refund of $4.00, for every pack of two RAT with an initial price point of $20.

However, as per most individuals, tax rates amount to approximately 30%, and the price of a refund for RATs stands at $6.50. While this may be applicable in most scenarios, it’s subjective to each individual. In the event of small businesses, the full cost of the test becomes eligible for exemption from FBT.

How to claim your costs back

Any test bought after July 1st, 2021 will be subjected to the new tax refund legislation. However, any test purchased before that date will not be reclaimable.

In order to claim your costs, you need to present proof of purchase. Therefore, it’s highly advisable to hold on to your receipt if you purchase any COVID-19 tests. According to the ATO, costs will be refundable if some form of record is available, even a written diary entry.

*The tax office states that the record of purchase needs to include what was purchased, how much was spent when it was bought, where it was bought, and it must be in English. 

However, not only will you need to prove that you purchased a test, but also that you need it for work purposes. Thus, you will not be able to claim a tax deduction on every test you buy.