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The federal government is set to make COVID-19 tests tax deductible for Australian individuals and exempt from fringe benefit tax (FBT) for businesses when they are purchased for work-related purposes.
Key points:
- PCR tests and RATs will be tax deductible, backdated to July 1, 2021
- Australians earning an income taxed at 32.5pc will receive a refund of about $6.50 for every $20 pack of two RATs
- Small businesses will reduce their FBT liability by about $20 for every dual pack of RATs purchased for $20
Initially, the change will see PCR and rapid antigen tests (RATs) become tax deductible, but the government will include future medically approved tests in the scheme.
The legislation will be in effect from the 2021-22 FBT and income years and will be backdated to July 1, 2021.
Australians earning an income taxed at 32.5 per cent will receive a tax refund of about $6.50 for every pack of two RATs purchased for $20.
Small businesses will reduce their FBT liability by about $20 for every dual pack of RATs purchased for $20 and provided to employees.
Treasurer Josh Frydenberg is set to announce the changes to tax legislation in a speech to the Australian Industry Group on Monday morning, the start of the first parliamentary sitting week for 2022.
He will also announce that the Productivity Commission will commence its second five-yearly productivity review with a specific focus on developing a roadmap to assist governments in creating productivity-enhancing reforms as the nation rebuilds after the pandemic.
Mr Frydenberg said the move to make PCR and RATs tax deductible brought COVID-19 tests "in line with other work-related expenses".
"COVID-19 tests are an important tool being used by businesses to protect their workforce and to ensure they can keep their doors open and our supply chains running," he said.
"As the pandemic has evolved so has our response, and by making common sense decisions like this, we are making it easier for households and businesses to get on with their lives."
Currently, in some situations where COVID-19 tests are purchased and used as a preparatory step, for example a retail worker using a test before going to work, rather than for use while working and earning money, the expense may not be tax deductible.
The amended law will clarify that all COVID-19 tests purchased for work-related purposes will be tax deductible for Australians and exempt from FBT for businesses.
Mr Frydenberg is also set to speak about new a Treasury analysis which he will say reveals Australian workers are taking part in a "great reshuffle", rather than what has been dubbed "the great resignation", a pandemic phenomenon that has seen people leave their job to pursue a better work-life balance.
According to the department's data, more than 1 million workers started a new job in the three months to November 2021, an increase of 65 per cent compared to 2020 and up 10 per cent on pre-pandemic levels.
The Treasurer said switching jobs "allowed workers to move up the job ladder for better pay".
"Treasury's latest analysis using Single Touch Payroll data has shown that workers that moved jobs typically experienced pay increases of between 8 and 10 per cent," Mr Frydenberg said.
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