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  • Seniors and pensioners tax offset

    If you're a senior Australian, you may be eligible for the seniors and pensioners tax offset (SAPTO). However, you can't claim the SAPTO if you were in jail for the whole income year.

    The SAPTO is available on assessment of your tax return.

    The SAPTO can reduce the amount of tax you are liable to pay. In some cases, it may reduce your tax payable to zero and you may not have to lodge a tax return. It is a non-refundable tax offset.

    In some cases, if you and your spouse are both eligible for SAPTO, you may be able to transfer your spouse's unused tax offset to you. We calculate their transfer amount and include this amount when calculating your SAPTO.

    On this page:

    Eligibility for the seniors and pensioners tax offset

    To be eligible for the seniors and pensioners tax offset (SAPTO), you must meet certain conditions relating to:

    You can use the Beneficiary tax offset and seniors and pensioners tax offset calculator to help you determine your eligibility for this offset and calculate the amount of offset you can claim.

    Eligibility for an Australian Government pension or allowance

    You meet this condition if any of the following applied to you in 2019–20:

    • you received an Australian Government pension or allowance from Centrelink
    • you received a pension, allowance or benefit from the Department of Veterans’ Affairs (DVA)
    • you satisfied the Centrelink age pension age requirement and were eligible for an Australian Government age pension during the income year, but didn't receive it because you didn't make a claim or because of the application of the income test or asset test and you satisfy one of the following
      • you have been an Australian resident age-pension purposes for either 10 continuous years or for more than 10 years of which five years were continuous
      • you have a qualifying residence exemption (because you arrived Australia as a refugee or under a special humanitarian program)
      • you are a woman who was widowed in Australia (at a time when both you and your late partner were Australian residents), you have made a claim for the age pension and you had two years residence immediately before your claim
      • you received a widow B pension, widow allowance, or partner allowance immediately before turning age-pension age
      • you would qualify under an international social security agreement
       
    • you satisfied the veteran pension age test and were eligible for a pension, allowance or benefit from Veterans’ Affairs during the income year, but didn't receive it because you didn't make a claim or because of the application of the income test or asset test and you satisfy either of the following
      • you were a veteran with eligible war service
      • you are a Commonwealth veteran, allied veteran or allied mariner with qualifying service.
       

    Centrelink pension age test

    To be eligible for an Australian Government age pension from Centrelink, you must be 66 years or olderExternal Link on 30 June 2020.

    Veteran pension age test

    To be eligible for a pension, allowance or benefit from Veterans' Affairs, you must meet the veteran pension age test and on 30 June 2020 be 60 years old or older.

    You meet the veteran pension age test if one of the following applied to you and you were eligible for a pension, allowance or benefit under the Veterans' Entitlements Act 1986:

    • you have eligible war service, that is, service in World War II or operational service as a member of the Australian Defence Force
    • you're a Commonwealth or allied veteran who served in a conflict in which the Australian Defence Force was engaged during a period of hostilities that is
      • World War II
      • Korea
      • Malaya, Indonesia
      • Vietnam
       
    • you're an Australian or allied mariner who served during World War II
    • you're the war widow or widower of a former member of the Australian Defence Force.

    Income

    You meet this condition if any of the following applied to you in 2019–20:

    • you don't have a spouse and your rebate income was less than $50,119
    • you have a spouse and the combined rebate income of you and your spouse was less than $83,580
    • at any time during the year you and your spouse had to live apart due to illness or because one of you was in a nursing home, and the combined rebate income of you and your spouse was less than $95,198.

    The phrase 'had to live apart' due to illness, refers to situations where you and your spouse don't live together because one or both of you have an indefinitely continuing illness or infirmity and as a result your combined living expenses were increased.

    The combined rebate income is the total of all of the following:

    • your rebate income
    • your spouse’s rebate income
    • the amount on which a trustee of a trust was liable to pay tax in respect of your spouse because your spouse was under a legal disability, such as being an undischarged bankrupt or a person who was declared legally incapable because of a mental condition.

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    See also:

    Amount of seniors and pensioners tax offset

    The amount of SAPTO that you may be entitled to depends on:

    • the amount of your rebate income
    • your marital status – if you are a member of a couple, whether you and your spouse either
      • live together
      • had to live apart due to illness.
       

    Had to live apart due to illness refers to situations where you and your spouse did not live together because one or both of you have an indefinitely continuing illness or infirmity and, as a result, your combined living expenses were increased.

    Rates and thresholds for the seniors and pensioners tax offset

    Rates and rebate income thresholds for SAPTO

    Status

    Maximum tax offset amount

    Shading-out threshold

    Cut-out threshold

    Single

    $2,230

    $32,279

    $50,119

    Each partner of a couple

    $1,602

    $28,974

    $41,790

    Each partner of an illness separated couple

    $2,040

    $31,279

    $47,599

    If more than one item in the table above applies to you during the income year, your offset amount will based on the amount that gives you the greatest entitlement.

    To be entitled to an amount of SAPTO, your rebate income must be less than the relevant cut-out threshold in the table above. If your rebate income is less than the shading-out threshold, you will be entitled to the maximum tax offset amount.

    Example – Single with rebate income exceeding the cut-out threshold

    Marko is single and is 67 years old. He qualifies for the Centrelink age pension but he does not make a claim for it. His rebate income is $85,690.

    Although Marko qualifies for the Centrelink age pension but didn’t make a claim for it, Marko is not eligible for SAPTO as his rebate income is more than the cut-out threshold of $50,119.

    End of example

     

    Example – Single with rebate income below threshold

    Simon is single and he receives the parenting payment (single) from Centrelink. Simon has a rebate income of $32,178.

    As Simon’s rebate income is less than the cut-out threshold of $50,119 and he receives an Australian Government pension or allowance, he is eligible for the tax offset.

    Simon is entitled to the maximum SAPTO amount of $2,230 as his rebate income is less than the shade-out threshold of $32,279.

    End of example

     

    Example – Couple living together and rebate income below threshold

    Clare and Roy are married and live together. Both Clare and Roy receive an Age pension from Centrelink. Clare’s rebate income is $23,020 and Roy’s is $25,677.

    Clare and Roy are each entitled to the maximum SAPTO amount of $1,602 as each of their rebate income is below the shading-out threshold of $28,974.

    End of example

    Tax offset reduction

    The tax offset reduces by $0.125 for every dollar by which your rebate income exceeds the relevant shading-out threshold amount.

    Example – Single with rebate income above the threshold

    José is single and he receives an Age pension. José has a rebate income of $39,000.

    José is eligible for the tax as his rebate income is less than the cut-out threshold of $50,119 and he receives an Australian Government pension.

    As José’s rebate income exceeds the shading-out threshold of $32,279, his tax offset is reduced as follows:

    $39,000 − $32,279 = $6,721

    $6,721 × 0.125 = $840.125

    $2,230 − $840.125 = $1,389.875

    This amount is to be rounded up to the nearest dollar. Therefore, José is entitled to a SAPTO amount of $1,390.

    End of example

     

    Example – Couple with spouse not eligible and rebate income above the threshold

    Keith and Jean are a married couple living together. Keith receives an Age pension but Jean has not reached the Age pension age and does not qualify for the Centrelink Age pension.

    Keith’s rebate income is $33,650 and Jean’s is nil. Their combined rebate income is therefore, $33,650. For determining whether they satisfy the cut-out threshold, each is taken to have a rebate income of:

    • 0.5 × $33,650 = $16,825.

    Jean is not eligible for SAPTO as she has not reached the Age pension age and is not eligible for an Age pension.

    Keith is eligible for the tax offset as his determined amount of rebate income ($16,825) is less than the cut-out threshold of $41,790, and Keith receives the Age pension. However, his actual rebate income is used in calculating the tax offset amount.

    As Keith’s actual rebate income of $33,650 is more than the shade-out threshold of $28,794, his tax offset is reduced as follows:

    $33,650 − $28,974 = $4,676

    $4,676 × 0.125 = $584.50

    $1,602 − $584.50 = $1017.50.

    This amount is to be rounded up to the nearest dollar. Therefore, Keith is entitled to a SAPTO amount of $1,018.

    End of example

    In some circumstances, a person may be eligible for the tax offset but their income amount means the tax offset is reduced to zero.

    Example – Couple with spouse eligible for SAPTO and rebate income above the threshold

    Vanh and his spouse, Julie, live together. They both receive the Age pension.

    Vanh has a rebate income of $32,590 and Julie's rebate income is $26,780. Their combined rebate income is $59,370. To determine if they satisfy the cut-out threshold, each is taken to have a rebate income of:

    • 0.5 × $59,370 = $29,685.

    Both Vanh and Julie are eligible for SAPTO as they both receive the Age pension and their determined amount of rebate income of $29,685 is less than the cut-out threshold of $41,790.

    As Vanh’s actual rebate income of $32,590 is more than the shade-out threshold of $28,794, his tax offset is reduced as follows:

    $32,590 − $28,974 = $3,616

    $3,616 × 0.125 = $452

    $1,602 − $452 = $1,150

    Vanh is entitled to a SAPTO amount of $1,150.

    Julie is entitled to the maximum tax offset amount of $1,602 as her actual rebate income of $26,780 is below the shade-out threshold of $28,974.

    Julie’s taxable income is also $26,780. The amount of tax payable on Julie’s taxable income exceeds the maximum SAPTO amount of $1,602. Therefore, there is no unused portion of the tax offset to transfer to Vanh.

    For information on how to work out transferring an unused portion of the tax offset, see Transferring the seniors and pensioners tax offset.

    End of example
    Last modified: 15 Jun 2020QC 31909