On Sunrise on Monday the 3rd of January 2022, Prime Minister Scott Morrison, on the topic of rapid antigen tests (RATs) stated:
“We already make them free to everyone who is required to have one. They are also tax deductible.”
The Prime Minister’s comments subsequently prompted a member of the Australian Taxation Office’s ATO Community group to ask the question:
“Is that right? I’ve not bought many, just for myself & my parents in case we need to use them, but it was still $100+ that being on a low wage is a lot to be out of pocket. Can anybody advise if this is legit?”
Tax and business experts have similarly queried the Prime Minister’s remarks, concerned that tax deductibility may in fact be applicable only in limited circumstances notwithstanding a change to legislation.
For example, whilst an individual taxpayer may be required by their employer to undertake RAT testing prior to arriving at work, the ATO may take the view that the testing happens on the taxpayer’s personal time – like getting dressed in uniform or travelling to the office – and thus may be “preliminary” to the income-earning day. The cost and use of a RAT would be considered incurred at a “point too soon” and therefore not be tax deductible. Outside of certain discrete circumstances (further detailed below), tax law would need to be changed to specifically allow individual tax deductions for the purchase and use of RATs.
If, on the other hand, you as a business owner were to provide your employees with RATs for use as a duty of care provision for your staff under the Work Health and Safety Act 2020, for example, the cost of acquiring the RATs should be tax deductible as a business expense. Where things get murky, however, is if the tests provided to your employees are then considered a Fringe Benefit.
Fringe Benefits Tax (FBT) is already one of the more expensive and hated taxes in the country and the application of such to RATs would make them inherently more costly for businesses. While various exemptions could apply, including under section 58P of the Fringe Benefits Tax Assessment Act 1986 (Exempt benefits – minor benefits), business owners would need to be mindful of how frequently the tests were provided, the total cost of tests provided per employee, and provided on employer premises to remain within the “minor”, “infrequent”, “irregular” and in “respect of the employment” rules.
Other FBT exemptions could be utilised to reduce any RAT-related FBT liability to zero, including the “otherwise deductible” provision, which might apply in situations where employees purchase their own RATs and are subsequently reimbursed by their employers. However, again, that eligibility would depend on the RATs themselves being otherwise deductible to the employee in question.
Whilst it may not be the government’s intention that RATs result in FBT complications for businesses given their current high levels of use across the country, without legislative change, FBT considerations cannot be dismissed just yet.
So what’s the answer??
Unfortunately, without further guidance from the Tax Office, we aren’t yet in a position to provide clear, definitive advice as to whether or not the purchase and use of RATs are deductible and/or exempt from FBT.
What we can tell you, however, is that the ATO, on the topic of “quarantine and testing expenses when travelling on work” provided guidance in late December 2021, stating:
“Expenses for accommodation, food and drink are normally private in nature and not deductible by employees. However, you can claim a deduction for accommodation, food, drink and incidental expenses you incur if you’re “travelling on work” during COVID-19 and must quarantine. You can also claim expenses you incur for required COVID-19 testing related to your overnight work travel. For example, a Polymerase Chain Reaction (PCR) test or rapid antigen test.
The cost of a COVID-19 test is considered to be an incidental expense as the travel is undertaken in the course of your employment. The cost of the COVID-19 test is deductible where the test is required for a work-related trip. If you do not have to pay for the COVID-19 test or your costs are reimbursed, you can’t claim a deduction
If your travel is for both work and private purposes, you may need to apportion your expenses.”
If you are selling RATs, you must include GST in the price of the kits as they are not a “medical aid or appliance” listed in either Schedule 3 of the A New Tax System (Goods and Services Tax) Act 1999 or the A New Tax System (Goods and Services Tax) Regulations 2019. Therefore, they are not GST-free.
For more general information about RATs for business owners, please visit the Business.gov.au website.
Bookkeeping Mistakes Costing You Thousands
When Up-To-Date Accounting Services first launched, our focus was primarily on helping businesses with their bookkeeping needs. Almost 22 years later, it’s safe to say we have seen and corrected all manner of weird and wonderful errors across various industries and software programs.
While we always endeavour to provide clients with feedback on some of the mistakes we pick up in their accounts, there are a number of mistakes that frustratingly persist and end up costing clients money in bookkeeping and accounting fees month after month, quarter after quarter, year after year. Money that could be better allocated to other areas of their business.
To try and help stop some of the “bleeding”, here are some of the most common bookkeeping errors we see and suggestions on how to fix them:
Problem: Inconsistent treatment of transactions
A classic example of this is a regular telephone bill. If you or the person doing your accounts aren’t consistent, you may find that telephone charges are allocated to “Office Expenses” or “Utilities” instead of “Telephone”, where they may actually belong.*
Solution: Set rules
Programs like MYOB and Xero offer you the ability to work smarter, not harder, by setting rules for different transactions. When you routinely incur the same types of expenses time after time, it makes sense to put some rules in place so that you don’t have to think about where costs are allocated. This functionality is both helpful and a genuine time and cost saver.
Problem: Data entry is inaccurate
This problem goes hand-in-hand with the one above. Going back to the monthly telephone expense example, if you are making errors with allocating your expenses, you may find your “Telephone” account doesn’t end up with 12 transactions across a 12-month period, when it otherwise should. Instead, you may have eight or ten telephone expenses in your Telephone account with the others allocated elsewhere. This problem is a common one in situations where multiple people are responsible for data entry/bookkeeping, for example.
Solution: Always check your work
If you take the time to review your work, you should see 12 transactions posted to your Telephone account over the course of a 12-month period. (Or alternatively three, if you’re looking at your quarterly accounts.) If you only see eight or ten transactions posted to your Telephone account, for example, odds are that you have either omitted some entries or accidentally mis-coded something. If you can catch and correct your mistakes before they get to us, you’ll save us having to make the adjustments for you which, in turn, will save you money.
In situations where more than one person is responsible for data entry, we recommend that each person has access to a Chart of Accounts and can see at a glance where various transactions need to go. If one person routinely makes the same coding errors, it should be brought to their attention as soon as practicably possible so they become aware of what they’re doing wrong, can make appropriate notes and modify their work moving forward.
Problem: Claiming 100% GST on everything
Some people assume that their software knows best and subsequently blindly accept what their systems tell them. One way in which this manifests is with the application of GST. In some situations, every transaction in a client’s accounts – regardless of whether they are GST-free or not – will have GST applied to them. This is a problem because it will result in inaccuracies come time to prepare your activity statements and – obviously – over claiming or under-reporting GST payable is the wrong thing to do.
Solution: Always check your invoices/receipts
It remains impossible at this stage in time for even the best cloud-based software programs to 100% know the ins and outs of your various transactions and so it is crucial that you double-check your tax invoices and receipts to ensure you are only ever claiming the GST you actually paid on your various expenses.
Some costs – motor vehicle registration fees, for example – require that you separate out the GST and GST-free components as GST does not apply to the entire expense; it only applies to the insurance component. Other costs, such as whole fresh fruit and vegetables, are GST-free and therefore no GST is claimable on their acquisition.
Problem: Not doing bank reconciliations
Bank reconciliations are important because they bridge the gap between what your bank statement shows you and what’s in your general ledger by taking into account any deposits not yet credited and any withdrawals not yet processed. In ensuring your various accounts reconcile, you can rest assured that your business currently has the cash within it that you think it has and any discrepancies are identified before they become problems. For instance, if you overestimate how much is currently in your bank account, you may unintentionally end up financially over-committed and unable to meet your day-to-day needs.
Solution: Always reconcile your bank accounts
Again, the best solution to this problem is to be methodical about checking your work before you submit it to us for activity statement or tax purposes. We recommend ensuring that all of your relevant bank accounts are fully reconciled which may require that you create a “To Do” list for yourself of all of the little bookkeeping or data entry jobs you need to handle before giving us the go ahead to finalise your accounts. If you can get to data entry errors or omissions before we do, you will likely save money in bookkeeping and accounting fees. Over time, the money you save on fees will add up.
Your mileage may vary
While the above is by no means a complete list of common data entry errors, hopefully it gives you a few things to keep in mind as you move into February and quickly towards the end of another quarter. If you would ever like to talk in more detail about your bookkeeping, please be sure to get in touch. We are always happy to help.
*As Charts of Accounts tend to differ from client to client, business to business, so too may your expense allocations. Please consider this scenario as an example only and not necessarily prescriptive to your individual circumstances.
Yay! Claimed Money!
Following our last newsletter on the topic of unclaimed money, we received the following feedback:
“I searched the NSW Government Department of Revenue site and found an unpresented cheque valued at $30.17 that belonged to me, back from when I lived in Sydney. That was over 20 years ago. I never would have known it was sitting there waiting for me. Thanks for the head’s up!”
“I was aware Dad had unclaimed money sitting around, but it was an eye-opener to see that Mum did, too — and in Victoria, a place she’s never lived! I’ve now helped her lodge a claim and she should have her funds in about four weeks.”
In case you missed them, here are the links to some of the various Unclaimed Money registers:
- Western Australia Department of Treasury
- New South Wales Government Department of Revenue
- Public Trustee of Queensland
- State Revenue Office Victoria
For anywhere else, a simple Google search for “Unclaimed Money Register + State/Territory” should do the trick.