covid test

Tax rules and exemptions for COVID-19 testing

FBT, COVID-19 tests and the otherwise deductible rule

Be aware of the rules and exemptions regarding COVID-19 testing

Whilst FBT obligations do exist, there are exemptions and deductions that can be granted when providing COVID-19 tests to employees

You may have to pay Fringe benefits tax (FBT) if you:

  • provide your employees or their family members with COVID-19 tests such as a rapid antigen test, or
  • pay for a polymerase chain reaction test.

However, the otherwise deductible rule (or a different concession or exemption) may apply to eliminate or reduce any FBT payable.

Types of benefits that may arise from providing COVID-19 tests

Different types of benefits may arise for FBT purposes when you provide, or pay for, your employees’ or their family members’ COVID-19 tests.

The types of benefit that may arise under the FBT law are:

  • an expense payment benefit – where you pay for, or reimburse, an employee’s or their family member’s, COVID-19 test.
  • a property benefit – where you purchase the COVID-19 tests and give them to your employees or their family members for free or at a discount.
  • a residual benefit – where you provide your employees or their family members with a COVID-19 test that isn’t an expense payment or property benefit.

Exemptions from FBT

Some benefits are exempt from FBT. If an exemption applies, you won’t need to:

  • pay FBT for providing the COVID-19 tests to your employees, or reimbursing them for their cost
  • consider whether the otherwise deductible rule applies.
Work-related medical screening

Work-related medical screening tests are exempt from FBT if both of the following apply:

  • testing is carried out by, or on behalf of, a legally qualified medical practitioner or nurse, and
  • testing is available to all employees.

If only some of your employees get COVID-19 tests, the tests are still exempt if they are offered to all employees.

If the tests you provide or reimburse do not meet these requirements, you may need to pay FBT unless the minor benefits exemption or ‘otherwise deductible rule’ apply.

Minor benefits exemption

This exemption will only apply if:

  • the tests are provided infrequently and irregularly
  • the cumulative value of the tests provided to an employee during the FBT year is less than $300.

The otherwise deductible rule

You can reduce the taxable value of an expense payment, property or residual fringe benefit by what’s known as the otherwise deductible rule.

This is the amount your employee would have been entitled to claim as a once-only income tax deduction if they had provided or paid for the COVID-19 test themselves.

There are special records that must be kept for the otherwise deductible rule to apply.

When the otherwise deductible rule applies to COVID-19 testing

From 1 July 2021, if an employee paid for a COVID-19 test for a work-related purpose they could have claimed a deduction if certain conditions were met.

To have claimed a deduction for the cost incurred to buy or pay for a COVID-19 test, your employee must have:

  • used the test for a work-related purpose, such as to determine if they can attend or remain at work
  • received a qualifying COVID-19 test, such as a
    • polymerase chain reaction (PCR) test through a private clinic
    • other tests in the Australian Register of Therapeutic Goods, including rapid antigen test (RAT) kits

The otherwise deductible rule only applies to the extent that your employee could have claimed the work-related portion of the expenditure on COVID-19 tests as an income tax deduction. For example, if you buy a multipack of COVID-19 tests and allow your employee to use some for private purposes (such as by other family members or for leisure activities), the otherwise deductible rule only applies to the portion of the expense, property or residual benefit used for a work-related purpose.

For the otherwise deductible rule to apply, you must have the appropriate records, including the relevant declaration(s).

When the otherwise deductible rule doesn’t apply

The otherwise deductible rule doesn’t apply:

  • to COVID-19 tests you provide if
    • your employee uses the test for private purposes – for example, to test their children before they return to school or daycare
    • your employee works from home and doesn’t intend to attend the workplace, or
    • you haven’t received the declarations that are required under the FBT law
  • to any travel or parking expenses you pay or reimburse your employees to get their COVID-19 test. This is because these expenses do not have a sufficient connection to your employee obtaining or undergoing a COVID-19 test to be regarded as being incurred in respect of testing them for COVID-19.

Keeping records for COVID-19 tests

To apply the otherwise deductible rule, you must keep records, including:

  • a record of the costs of COVID-19 tests you pay for your employees (including those you reimburse them for) and the dates you paid for them. This may include a receipt or invoice.
  • a completed appropriate employer declaration or employee declaration.

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Superannuation contributions

Changes to work test requirements for non-concessional contributions

Changes to the work test requirements for superannuation contributions

Soon older Australians will no longer have to meet the work test to make non-concessional contributions.

From 1 July 2022, members under 75 years of age will be able to make or receive non-concessional contributions without meeting the work test, subject to existing contribution cap limits. They may also be able use the bring forward rule.

Fund Trustees will no longer have to administer the work test at the time they accept the contribution.

Removing the requirement to meet the work test when making non-concessional contributions will simplify the rules governing superannuation contributions and increase flexibility for older Australians to save for their retirement through superannuation.

However, those aged 67 to 74 will need to meet the work test if they wish to make a personal concessional contribution for which they intend to claim a personal superannuation deduction.

For those individuals there is no change to the way they lodge their notice of intent to claim or vary a personal super contribution deduction.

The only change is that now the ATO will be checking to see if they meet the work test at the time they lodge their income tax return. The work test must be met during the financial year in which the contribution is claimed.

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Claiming Family Tax Benefit and Child Care Subsidy

REMINDER: Claim Family Tax Benefit and Child Care Subsidy by 30 June

Confirm your income now for the 2020/21 year to receive the Family Tax Benefit (FBT) or Child Care Subsidy (CCS).

You need to confirm your income by lodging your tax return for the 2020/21 year, or advising that you do not need to lodge a tax return, no later than 30 June 2022, if you wish to:

If you DON’T do this:

  • You will not receive your FTB supplements and top ups for the 2020/21 year
  • Your CCS will reduce to zero – Services Australia will balance CCS once they receive:
    • all attendance information from your child care service
    • confirmation of your family’s income
  • You may also be required to repay all the FTB and CCS you got for the 2020/21 financial year.

If you are eligible the Child Care Subsidy (CCS) is paid directly to your child care provider to reduce the fees you pay. CCS claims can only be backdated by 28 days. CCS replaced Child Care Benefit and Child Care Rebate when they stopped on 1 July 2018.

Act now!

To ensure both you and your partner’s Tax Returns are lodged on time, please contact your Allan Hall Business Advisor or simply click below.

We are anticipating a high demand off the back of this article. To enable us to lodge your returns by the 30 June deadline, we would encourage you to send in your information as soon as possible and no later than 31 May 2022.

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ABN intent to cancel program

The ATO is reviewing Australian business numbers (ABNs) to identify potentially inactive ABNs for cancellation.

We’ve made improvements to the ABN cancellation program by introducing a new automated process that allows you to confirm if an ABN is still required via a secure voice response system.

An ABN may be selected if it has not reported business activity in a tax return, or there are no signs of business activity in other lodgments or third-party information.

Any income earned under an ABN needs to be reported in your tax return, regardless of the amount. By keeping your tax obligations up to date the ATO can see you are actively undertaking a business, therefore the ABN should not be cancelled.

If the ATO believes you are no longer carrying on an enterprise, they may contact you or your accountant to advise of their intention to cancel the ABN.

  • If your ABN is identified for cancellation you may be contacted and advised what actions you need to take to prevent your ABN from being cancelled
  • If you are no longer in business, no action is required to be taken
  • If your ABN has been cancelled and you are still entitled to one, you will need to re-apply to reactivate it.

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