As the Covid-19 pandemic continues on and the national focus has shifted to vaccination rates and Rapid Antigen Testing (RAT) it is important to understand the tax treatment of any costs or incentives relating to Covid vaccination and testing.
If a cash payment is offered to an employee as a ‘reward’ for obtaining a Covid vaccination this amount is deemed assessable income to the employee as salary and wages. The employer is required to withhold tax from the payment as per normal wages.
Any non-cash benefits such as a gift voucher, goods or services provided for vaccination will not be assessable income to the employee. These non-cash amounts may attract a Fringe Benefits Tax (FBT) liability to the employer and a subsequent possible reportable fringe benefits amount to the employee, depending on various thresholds.
If additional leave is granted to an employee to provide time to receive a vaccination, this will not create any assessable income to the employee. The leave costs will be an allowable deduction to the employer as part of the normal salary and wages costs.
Any travel costs incurred by an employee to receive a Covid vaccination are deemed private expenses, even if vaccination is mandated by their employer.
The cost of acquiring a RAT or PCR test incurred by an individual will be tax deductible if the tests are specifically incurred in the course of work related travel and are mandated travel requirements for the respective jurisdiction.
Some employers may acquire RATs for testing their employees or reimburse employees for the cost of RATs privately acquired and used as part of workplace testing. The provision of Covid tests by an employer may be providing a fringe benefit to employees. Work related medical screening is exempt from FBT if the following conditions apply:
- The test is carried out by a legally qualified medical practitioner or nurse
- Testing is available to all employees
- If the workplace testing does not satisfy these requirements, the employer may need to pay FBT unless the minor & infrequent FBT exemption can be satisfied.
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