Overview
Tax offsets (sometimes referred to as rebates) directly reduce the amount of tax you must pay. They are not the same as tax deductions. Deductions only reduce your total assessable income dollar for dollar and your tax payable at most by your marginal tax rate. Each dollar of tax offset reduces your tax payable by a dollar regardless of your taxable income.
Tax offsets are used to:
- introduce fairness in the way people in different circumstances are taxed - for example, the parent, spouse's parent or invalid relative tax offset compensates people for supporting family members
- encourage people to do some things the government would like them to do - for example, the government encouraged people to take out private health cover to reduce pressure on the public health system, by offering a refundable tax offset.
Taxpayers with dependants
Taxpayers with dependants may be eligible for:
- dependent spouse, parent or invalid relative tax offset
- housekeeper tax offset
- child-housekeeper tax offset.
Pensioners and senior Australians
The seniors and pensioners tax offset and the pensioner tax offset allow eligible people to earn more income before they have to pay tax and the Medicare levy The mature age worker tax offset encourages mature age workers to stay in the workforce by offering a tax break of up to $500 for people aged 55 or more.
Superannuation
If you have income from an Australian superannuation income stream, you may be entitled to a tax offset if you are either:
- in receipt of a disability superannuation benefit or death benefit income stream
- aged 55 years or older.
If you make contributions to a complying superannuation fund or a retirement savings account on behalf of your spouse who is earning a low income or not working, you may be entitled to a tax offset.
Health insurance
The private health insurance offset is a percentage of the premium you pay to a registered health insurer for a complying private health insurance policy.
Education tax refund
The education tax refund (ETR) has been replace by a new payment called the Schoolkids Bonus. You cannot claim the ETR for expenses incurred in 2011-12, or any excess eligible expenses you carried forward from the previous year.
For more information about the changes to the ETR, go to Education tax refund - what you need to know.
Low income earners
You may be eligible for a tax offset if you are a low-income earner. You don't have to claim this offset - we will work it out for you when you lodge your tax return.
Benefit recipients
The beneficiary tax offset is available to taxpayers who receive certain Centrelink benefits and Commonwealth education allowances. Generally, you pay no tax if your only income is a qualifying benefit or allowance. If you are not in receipt of the full amount of any qualifying benefits and allowances or have other taxable income you may be eligible for a partial offset.
Medical expenses
You can claim a tax offset of 20% of your net medical expenses over a certain limit. There is no upper limit on the amount you can claim. Net medical expenses are the eligible medical expenses you've paid, less any available refunds from Medicare or a private health insurer.
Zones and overseas forces
Offsets are available for people who lived or worked in remote or isolated areas of Australia or served in forces overseas, to partially compensate them for being in those areas.
Sections within Overview
Last Modified: Friday, 29 June 2012