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Tax deductibility of COVID-­19 test expenses

Source: The Hon Michael Sukkar MP 

The Morrison Government is taking action to ensure that COVID‑19 tests (including Polymerase Chain Reaction and Rapid Antigen Tests) are tax-deductible for hard‑working Australians and exempt from fringe benefit tax for businesses, where they are purchased for work‑related purposes.

To remove any doubt, the Government will introduce legislation to make clear that work‑related COVID‑19 test expenses incurred by individuals will be tax deductible. This applies both when an individual is required to attend the workplace or has the option to work remotely.

By introducing this legislation, the Government will also ensure that fringe benefit tax will not be incurred by employers if they provide COVID‑19 testing to their employees for work‑related purposes.

This change will take effect from the beginning of the 2021‑22 tax year and will be in place permanently.

This action recognises that COVID‑19 tests are an important tool for mitigating transmission risks and absences from the workplace.

The Morrison Government has acted swiftly throughout the pandemic to provide Australians and small businesses with clarity and certainty, and continues to do so as they transition back to their workplaces.

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The move on RATs has been welcomed by CPA Australia, which called for it in its budget submission.

“We welcome the decision to make RATs tax-deductible and FBT exempt. This will help business and employees manage the workplace costs of COVID-19 compliance,” said Elinor Kasapidis, senior manager tax policy at CPA Australia.

“This is good news, and we expect practitioners will want to let their clients know about the changes.”

While CPA Australia backs the decision on RATs, Ms Kasapidis noted that “there are a few traps for the unwary which we’d encourage practitioners to warn clients about at the same time”.

Tony Greco, general manager of technical policy at the Institute of Public Accountants (IPA) also welcomed the government’s move to make COVID-19 tests tax-deductible and FBT exempt, noting that it removes the “uncertainty” being felt by practitioners and their clients.

We have yet to receive detailed 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. The existing FBT rules are antiquated and cannot deal with these new emerging issues and underlies a bigger systemic problem with the FBT regime which is another story for another day,” Mr Greco said.

“It is also good news for employees if they can deduct the cost of procuring RATS for work purposes as this was problematic under existing tax rules.

What we need to see now is the details to ensure the words match the legislative outcome so that we can get on to more important matters and remove all the uncertainties associated with the cost of procuring RAT’s for both employers and employees.”

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Part 7 Penalty: Directors Are Personally Liable When Facing Super Guarantee Stuff-Ups (Part 2)

Due to Covid-19, there was an amnesty period for businesses to comply and voluntarily disclose their unpaid super via SGC (Super Guarantee Charge) without incurring the administrative penalty or administration component, and to claim a tax deduction for the Superannuation Guarantee Charge (SGC) amounts paid. The Superannuation Guarantee (SG) Amnesty closed on Monday 7 September 2020. Business owners should have received letters from ATO if they were having unpaid super without lodging SGC by that time. Business owners, directors and volunteer directors of NFPs should pay attention to the key dates below:

Understandably, your business might have a cash flow issue during Covid-19, so if you have missed the first payment deadline, please do not miss the SGC deadline, which is exactly 1 month after the first payment deadline. If you are uncertain of how to fill an SGC form, please seek advice from your accountants or bookkeepers.

Please be aware that once you submit your SGC form, ATO will send you a statement that outlines the super owing amounts. It means that ATO has distributed super payments to your staff super funds. You will be required to clear your SGC debts with the ATO. Referring back to Part 1 in which I explained the consequences of having missed $10,000 for 2 quarterly super payments would turn into a $33,850 liability.

Don't forget the severity of the Part 7 penalty alone can drive businesses to insolvency, and directors’ personal liability is a further risk, especially when you don’t have a good financial system or governance!

My tips to stay in compliance:

  • Consider super obligations as important as staff salary payments;
  • Include SGC as a part of your compliance process, saving the key dates;
  • Make an informed decision between a business loan cost vs. the heavy penalty of unpaid super;

There are special circumstances that ATO may consider to reduce the penalty rate from 200%. These circumstances could be: 

  • Health & mental incapable (death or serious illness); 
  • Unprecedented situation (can’t access financial records due to bushfire); Loss of files due to cyber-attack; 
  • Having a good compliance history. 

If you would like further information or to discuss your circumstances, please contact Tailored Accounts. We will assist with providing advice on your circumstances and any potential liability; representing your business with the ATO to make a voluntary disclosure.

 

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