How to claim a tax deduction for rapid antigen tests

Rapid antigen tests will soon be tax-deductible in Australia. Here's what you need to know.

Australians will be able to claim rapid antigen tests as a tax deduction under new rules being fast-tracked by the Australian government. The tax law amendment will cover rapid antigen test (RAT) kits and other COVID tests purchased in the 2021/2022 financial year.

To find out who is eligible for the tax deduction and how it works, we spoke to Alison Banney, banking editor at Finder. Here are the chief issues to be aware of.

RAT tax deductions for individuals

Australians will be able to claim a tax deduction for rapid antigen tests they purchased as part of their work.

"Like any other expense you've faced as a direct result of your job, you'll be able to claim RATs as a tax deduction this year," Banney said. "But before you start claiming dozens of tests on your tax return, there are a few limitations to be aware of."

"First, you can only claim the RATs that you bought in order to go to work or do your job. You can't claim RATs you bought for other purposes like socialising with friends and family over Christmas or travelling (unless you were travelling for work)."

"Also, you can't make a claim if the tests were supplied by your employer or you've already been reimbursed for the cost. That would be double-dipping."

If you were eligible for free rapid antigen tests as a concession card holder, you obviously can't claim those either.

What dates are covered?

"You'll be able to claim any RATs you've purchased for work from the start of July 2021 until the end of June 2022 in this year's tax return."

RATs only received approval to be sold in Australia in September 2021, so any test that you purchased for work should be covered.

How do I claim a tax deduction for COVID tests?

RAT purchases will fall under work-related expenses, which covers costs you incurred to earn your employment income.

Naturally, you will need to hold onto your receipts to prove you paid for the tests. A digital record such as a bank statement is also fine.

Do I get the full purchase amount back?

No. By claiming something as a tax deduction, you're only reducing your overall taxable income by that amount and you're not getting a refund for the entire purchase.

"If you're in the 32.5% income tax rate bracket, you'll get about a third of the purchase price back in the form of a refund at tax time," Banney explained.

What types of tests are covered?

In addition to rapid antigen tests, PCR tests from private clinics will also be tax-deductible. The government has flagged that future "medically-approved tests" will also be included in the scheme.

You can claim a COVID test regardless of whether the result was positive or negative.

Rapid antigen tests for business

A lot of businesses have been supplying RATs to employees, particularly in industries such as hospitality, retail and construction where staff can't work from home. The Federal government is keen to show it is assisting these businesses with COVID-related expenses, particularly with an election looming.

"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," treasurer Josh Frydenberg said in a speech to the Australian Industry (AI) Group.

Employers will gain an exemption from fringe benefits tax (FBT) for coronavirus tests under the new draft laws. This means the total cost of the test is exempt from FBT.

"For example, if you've bought a 5-pack RAT for $50, you can reduce your FBT by the full $50 amount," Banney said. "However, similar rules apply around double-dipping. You can't claim the cost of any tests that your staff have purchased themselves."

For more information on tax deductions and professional tax advice, head to our tax return checklist.