Flu vaccinations are exempt from fringe benefit tax (FBT) if they are provided to employees either through a clinic set up on work premises, or where a voucher is given to the employee to use at their doctor or another clinic. This is because the vaccination falls under a specific exemption targeting a health and safety risk in the workplace.
However, there has been an inconsistency in the legislation. If an employee pays for a vaccination themselves and is then reimbursed by their employer, the reimbursement is actually taxable and subject to PAYE; due to health-related expenditure being considered to be private in nature.
This is a product of the standalone nature of the FBT rules and the employee reimbursement provisions. Something which is often misunderstood by employers.
A proposed new section of the Income Tax Act aims to resolve this issue, to ensure employers are not worse off if they follow the reimbursement path, by prescribing that an amount paid by an employer to or on behalf of an employee for a flu vaccination will be exempt income of the employee.
The draft legislation states that the amendment will be effective for the 2025 – 26 and later income years.
