Two things business should know now that RATs are FBT exempt

a rapid antigen test and some masks RATs fbt

Unsplash/Guido Hofmann

Australians can claim rapid antigen tests (RATs) when they do their tax, and businesses will be excused from the fringe benefits tax (FBT) as the COVID-19 tests emerge as a key battleground ahead of the federal election.

Treasurer Josh Frydenberg will announce the change at an Australian Industry Group event today, explaining that business’ FBT liability would be decreased by $20 for a dual-pack of RATs, while a person on more than $45,000 would receive around $6.50 back in tax for a two-pack of RATs worth around $20.

“By making common-sense decisions like this, we are making it easier for households and businesses to get on with their lives,” Frydenberg says.

Plus, the legislation will be backdated to July 1, 2021, points out Elinor Kasapidis, senior manager tax policy at CPA Australia, meaning if you’ve purchased RATs for work-related reasons before now, “you may be eligible for tax relief”.

But Kasapidis warns there will be at least two important caveats for businesses to consider before cashing on the new tax change.

“The RATs must have been purchased for work use; it doesn’t look like private usage is covered,” she says.

You must also have evidence to substantiate your claim, she continues, so RATs you’ve purchased before now may not be deductible unless you had the foresight to keep your receipts or invoices.

“This may leave a sour taste in the mouth of businesses and individuals who have already purchased RATs for work use and haven’t kept their records,” she says.

“Given we’re eight months into the tax year already, this highlights the need for faster decision making by government.”

Greg Wilkins, a client director at Pitcher Partners Sydney, says he hopes the tax changes will apply to a broad scope of businesses, particularly as small businesses have been vulnerable to low consumer confidence.

“Employees who have avoided taking tests due to the cost will now feel relief as testing costs will be effectively reduced and their health better protected,” he says.

“In particular, removing the compliance time and cost for smaller employers who have not previously provided taxable fringe benefits will mean those business operators can get back to focusing their attention on steering their businesses through these challenging times and concentrating on what they do best — their day-to-day operations.”

The benefits of the tax change will hang on the words matching the legislative outcomes, general manager technical policy at the Institute of Public Accountants Tony Greco says, so consumers and businesses can focus on the task at hand: procuring the elusive RATs.

Shortages on the free market have been causing grief for businesses and consumers for much of this year, with some accusing the federal government of failing to prepare for Omicron last year, despite receiving warnings well in advance.

“We have yet to receive detail wording of the legislative changes, but if his comments are followed through, it will remove some of the angst and need for employers to seek professional advice to ascertain whether any of the existing FBT exemptions could apply,” he says.

But, he warns, “the existing FBT rules are antiquated and cannot deal with these new emerging issues — underlies a bigger systemic problem.”

It comes as Opposition Leader Anthony Albanese confirmed under a Labor government RATs would be free, though walked back on the policy in clarifying a “limited” number would be available through Medicare.

Frydenberg again smeared the idea, saying Labor “has committed to provide RATs for free on an ongoing basis, with an estimated ongoing cost of up to $13 billion per year that is simply unsustainable”.

But Albanese has said before that the idea is “not a radical proposition”.

“They should be available through the Medicare schedule, you would have a limit, as there is, the government has put a limit on concession cardholders,” Albanese explained on the ABC.

“That’s the way that you can control supply, it’s not rocket science here, that’s the benefit of having Australia’s Medicare system.”

Meanwhile in the US, the Biden administration has confirmed 1 billion free tests would be posted out to every citizen, with 60 million households set to receive their tests shortly.

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