COVID-19 tests to be tax deductible

From 1 July 2021, any costs incurred by an individual to take a COVID-19 test for work-related purposes will be tax deductible.

The cost incurred in taking a COVID-19 test will be tax deductible for you as long as the test was used for a work-related purpose.

The legislation has passed through the parliamentary process and will become law. It applies from 1 July 2021, which means you can make claims in your next income tax return.

The new legislation provides a specific deduction and removes any previously held ambiguity about whether an expense for a COVID-19 test was deductible. For the purchase of a COVID-19 test to be tax deductible:

• must have paid for the test and not been reimbursed by your employer, and
• were required to take the test before going to work because:
  • of a public health order
  • your employer has asked or required you to take one, or
  • you were previously a positive case and needed to show your employer a negative test before going back to work.

It is important to point out that the deductibility is solely on the requirement to take a test. The test result, or whether you actually worked on the day you took the test, is irrelevant.

Apportionment

You will need to apportion your deduction when you have bought a packet with multiple tests and you have only used some of them for work-related purposes.


Substantiation
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It is important to always keep records and receipts of items where you want to claim a tax deduction.

However, if you don’t have the receipts handy, don’t worry. We’ll ask you at tax time to come up with a reasonable calculation for your claim, as the new law comes under rules where you might not have a receipt. This rule generally allows you to make a claim up to $300 for various expenses in your tax return.

If you need to know more about the new allowable deduction, please give our office a call. We would be delighted to discuss this with you further.