Tax and super obligations of providing COVID-19 vaccination incentives to employees

COVID-19Tax

16 February 2022

If your business has offered its employees an incentive when they have received the COVID-19 vaccine, it is important to talk to your tax consultant about the different tax considerations for any incentives provided. The tax treatment of the incentive will depend on how you have incentivised the employee.

The ATO has summarised its views of these obligations in this fact sheet and this article provides the various tax and superannuation guarantee considerations based on each form of incentive.

Cash payment

If you provide a cash payment to your employee for getting their COVID-19 vaccination, you are required to withhold tax from this amount. This amount should also be declared as income and be treated as ‘ordinary times earnings’ for superannuation guarantee purposes.

Non-cash benefits

Non-cash incentives and rewards (e.g. goods, services, vouchers, etc.), where an incentive or reward is provided by the employer to the public at large as well, would not be regarded as a fringe benefit. This is because the benefit is not provided in respect of an employee's employment so has no fringe benefits tax (FBT) obligation.

Where an incentive or reward is provided by the employer which is not provided to the public at large, the incentive or reward would constitute a fringe benefit and FBT would be payable unless the incentive or reward satisfies one of the FBT exemptions.

COVID-19 testing

You may require your employees to undertake COVID-19 testing before attending the workplace. Your employees may also be required to have COVID-19 tests if they are travelling for work.

Where a test is provided to an employee, or you reimburse the cost of a test, you may be providing a fringe benefit to your employee.

However, the tests are exempt from FBT as work-related medical screening when both of the following conditions apply:

  • Testing is carried out by a legally qualified medical practitioner or nurse.

  • Testing is available to all employees.

If only some of your employees get COVID-19 tests, the tests are still exempt if they are offered to all your employees.

If the tests do not meet the above requirements, FBT may be payable unless the minor benefits exemption or the ‘otherwise deductible’ rule applies. The ‘otherwise deductible’ rule may apply to reduce the taxable value of COVID-19 tests that are taken because an employee is travelling on work, and:

  • The test is required by the destination jurisdiction; and

  • For the employee to return to Australia or their home State or Territory.

Emergency health care

There is a limited FBT exemption if you provide emergency health care to an employee affected by COVID-19. The FBT exemption only applies to health care treatment provided:

  • By an employee of yours (or an employee of a related company).

  • On the employer’s premises (or premises of the related company).

  • At, or adjacent to an employee's worksite.

If you pay for your employee's ongoing medical or hospital expenses, these costs would be subject to FBT.

Flu vaccinations for employees working from home

Providing flu vaccinations to employees is generally exempt from FBT because it is work-related preventative health care.

If only some of your employees choose to receive the flu vaccine, it is still exempt from FBT if it is offered to all employees.

Paid leave

Paid leave will be treated like any other paid leave an employee takes if you have granted the leave to:

  • Allow the employee to receive a COVID-19 vaccination.

  • Recover from any side effects after receiving the vaccination.

This means that the payments that an employee receives while they are on leave should be treated as salary or wages.

For more information on your tax and super obligations when providing COVID-19 vaccination incentives to employees, please speak to your tax consultant or submit this form and one of our team will call you back.

Author: Christopher Heyes

Chris has over 20 years’ experience providing practical advice and compliance services in the various areas of employment tax such as payroll tax, Fringe Benefits Tax (FBT), superannuation guarantee, workers compensation and pay-as-you-go (PAYG) Withholding. Chris has extensive experience working with clients across many areas of tax consulting to manage employment taxes risks and exposure. He has proven this experience across a broad range of industries and client categories including private companies, large corporations, government agencies and family owned businesses. Chris specialises in providing tax effective solutions which also take into account other tax and commercial considerations. My Specialty • Employment Taxes • Global Mobility