Testing for COVID-19 will now be a tax deductible expense under sweeping new changes to alleviate cost pressures for workers and businesses.
Set to deliver a speech on Monday to the Australian Industry Group, Treasurer Josh Frydenberg will outline additional tax and fringe benefits for costs associated with pandemic management.
His speech is also set to unveil the second five yearly review from the Productivity Commission, which will spell out reforms and recommendations to assist the economy beyond the pandemic.
Approved rapid antigen and PCR tests will become tax deductible for workers and exempt from fringe benefits tax for businesses from the 2021-22 income year onwards.
"We will ensure that COVID-19 testing expenses are tax deductible for testing taken to attend a place of work, giving businesses and individuals more clarity and assurance," An excerpt of Mr Frydenberg's speech says.
"We will also ensure that fringe benefits tax will not be incurred by employers where COVID-19 tests are provided to employees for this purpose."
An Australian worker on a marginal tax rate of 32.5 per cent will receive a refund at tax time around $6.50 for a $20 RAT pack.
Businesses will reduce fringe benefits tax liability by approximately $20 for every dual RAT kit provided by to employees.
Mr Frydenberg highlighted the tax deduction changes are in part to assist ongoing supply chain continuity and to mitigate further workforce disruptions.
"COVID-19 tests are an important tool being used by businesses to protect their workforce and to ensure they can keep their doors open and our supply chains running," he said.
Pre-emptive tests bought by individuals where it is not applicable to a work setting would not be covered by the tax deduction changes.
The Commonwealth is also set to release for economic analysis on the state of Australia's current labour market, which found switching jobs was the fastest way to increase someone's pay packet.
Treasury's analysis is based on single touch payroll data.
It found switching jobs on average meant a worker was bumping their salary up between 8 and 10 per cent.
Both Treasury and the Reserve Bank have outlined that wage growth was crucial for easing current economic policies brought in to cushion the financial blow from the pandemic.
"Switching jobs allows workers to move up the job ladder for better pay," Mr Frydenberg said.
"They also move to more productive firms, helping those firms to grow.
"All of this helps to lift productivity".
The five year productivity report is expected to be completed within the next 12 months.