Across Perth and wider Western Australia business owners are faced with ensuring that their staff and team members are wearing facemasks and PPE to come to work. And typically the provision of this personal protective equipment in a tax effective way is of up most importance to ensure that your team is functional and working well.
Why should you salary package surgical face masks
Ensuring that you tax effectively provide face masks to your team will reduce the cost of the face masks to your team.
If a worker was on the highest tax rate and purchased $50 of N95 surgical face masks from their salary the tax system would effectively require them to earn $109 of salary and wages (which includes the cost of payroll tax, super guarantee levy and personal income tax). However if the employer salary packaged the same $50 they could claim the GST credit on the surgical face masks and end up with a net employment cost of $45.
So the net overall employment cost can fall from $109 to $45 simply by understanding the tax system and how it applies to Covid related face masks.
Why can you salary package face masks?
If you provide a personal benefit to your team fringe benefits tax will create an additional layer of tax to the employer. And if the employer can claim GST the fringe benefits tax liability to the employer will effectively increase to reverse the tax benefit from claiming the GST input tax credit.
However, this only relates to personal benefits (like gym memberships or kids school fees). If an employer provides a team member with safety equipment to allow them to do their job that cost is not considered a “personal benefit”. Typically items can also include hand sanitizer, safety glasses, anti-bacterial spray or hairnets.
What is the other benefit of providing face masks
Many employees are purchasing face masks or surgical equipment from their local pharmacy. However as an employer you can increase your purchasing power and obtain bulk buying discounts in addition to the tax benefits discounts discussed above.
Is there a situation when face masks are not tax deductible?
If your team is working from home and never coming to the office the face masks are not provided to your team for safety reasons. If the primary purpose of your face masks is to allow your team to say, go to the movies, then the tax system will look at the face masks as a private benefit and apply fringe benefits tax.
The same tax impact will apply if you attempt to salary package N95 face masks to the family of your team (unless of course you employ those family members).
Can you claim a tax deduction for the Covid jab?
Currently the Covid vaccine does not carry a cost to the employee or the employer. So there is no capacity to provide salary package the cost of the Covid jab.
However if you employed a team in a remote area and they needed to travel to obtain their Covid vaccine as an employer you could tax effectively structure the travel to the medical professional providing the vaccination. Of course the primary purpose of the travel would need to be to obtain a Covid vaccination – and the reasonable person test will consider the primary purpose of the travel.
If your team do not live in a remote area you most likely cannot claim a tax deduction for the travel costs to become vaccinated.
Can you incentivize team members to become vaccinated?
If you pay an employee a cash incentive to have the Covid jab then you will need to pay SGL and PAYG Withholding Tax on the incentive paid to your team member. You will also need to declare it in your Single Touch Payroll Reports and in the annual payment summary to the employee.
So the net effective of the above Covid tax incentive is that the employee will incur tax on the cash payment.
However if you provide your workers with another type of incentive to become vaccinated the tax outcome can be different. For example if you provide your workers with a supermarket gift voucher (like Coles or Woolworths) the voucher is not “cash”. This means that the voucher cannot be part of the employees taxable income.
In this instance the provision of a $200 voucher might be considered a “minor” fringe benefit and not liable for fringe benefits tax and not taxable to the employee. Of course this situation will vary from employer to employer and if done incorrectly it will result in a fringe benefit tax liability or, depending on the employer, fringe benefits tax might apply to the gift voucher.
Can you claim a tax deduction for your smart-phone?
If you obtain a smart-phone simply to prove your Covid vaccination status you will not be able to claim a tax deduction on that basis alone. The smart-phone will be considered a private cost and the act of using it to access certain places of work will not, by itself, be enough to claim a tax deduction for your iPhone or Android phone.
However an employer can provide their team with mobile phones where the primary purpose of the mobile phone is for work purposes.
If you want to claim a tax deduction for your mobile phone you will need to substantiate the cost of the mobile phone. You could potentially do this by keeping a 4-week diary of your business and private use.
The tax benefits of Covid PPE are a moving target as lockdowns and restrictions wax and wane. What is important is that you are actively engaged with a focused tax professional who will strategically navigate your tax opportunities when faced with new situations.
At Westcourt we are a full service tax advisory business. We are not distracted with other areas of advice like promoting investments, audit and liquidations. Our single tax focus on families in business gives us an additional depth of knowledge that is unique to the market – why not call us regarding opportunities that are available to your business and Covid impacts.