Tax legislation is set to be changed to make COVID-19 tests tax deductible for Australian individuals and exempt from fringe benefit tax (FBT) for businesses. 

The plan is to make PCR and rapid antigen tests (RATs) become tax deductible, with the possibility to include other medically approved tests in the scheme in the future.

The changed legislation will come into effect from the 2021-22 FBT.

Australians in the 32.5 per cent income tax bracket will receive a tax refund of about $6.50 for every pack of two RATs purchased for $20.

The FBT liability of small businesses will be reduced by about $20 for every dual pack of RATs purchased for $20 and provided to employees.

Currently, when COVID-19 tests are purchased for a preparatory step, like a retail worker using a test before going to work, they may not be tax deductible.

The amendments will make all COVID-19 tests purchased for work-related purposes become tax deductible for Australians and exempt from FBT for businesses.