Tax Offsets & rebates

Tax offsets (sometimes referred to as rebates) directly reduce the amount of tax payable on your taxable income.

In general, offsets can reduce your tax payable to zero, but on their own they can’t get you a refund.

If you receive Government benefits

The beneficiary tax offset is available if you receive certain Australian Government allowances and payments.

You pay no tax for the year if you:

• only receive any of the qualifying benefits and allowances, and
• have no other taxable income.

If you have other assessable income you may still need to pay some tax.

To claim the offset, you must declare the payment you receive at the correct item on your tax return.

The ATO will automatically calculate the offset for you when the ATO process your tax return.

If you have dependants

You may be entitled to a tax offset if you maintained your:

• spouse
• child or sibling aged 16 years or older
• spouse’s child or sibling aged 16 years or older
• parent, or
• spouse’s parent

and they are an invalid or carer.

An invalid must have received one of the following:

• a disability support pension under the Social Security Act 1991
• a special needs disability support pension under the Social Security Act 1991
• an invalidity service pension under the Veterans’ Entitlement Act 1986.

A carer must have cared for your or your spouse’s invalid child or sibling aged 16 or older and:

• received a carer payment or carer allowance under the Social Security Act 1991 for the care they provide for that person, or
• been wholly engaged in providing care to a person receiving:
  • a disability support pension under the Social Security Act 1991
  • a special needs disability support pension under the Social Security Act 1991, or
  • an invalidity service pension under the Veterans’ Entitlement Act 1986.

 Medicare levy surcharge

The Medicare levy surcharge (MLS) is designed to reduce the demand on the public Medicare system.

You will be required to pay the MLS if your income for MLS purposes is above the base income threshold and you or your family do not have an appropriate level of private patient hospital cover. This applies unless you are exempt from paying the Medicare levy and your dependents are also exempt or have an appropriate level of private cover.

For 2024/25 the base income threshold is $97,000 for singles and $194,000 for families. However, you do not have to pay the MLS if your family income exceeds the threshold but your own income for MLS purposes was $26,000 or less.

Private patient hospital cover is provided by registered health insurers for hospital treatment provided in an Australian hospital or day hospital. You must arrange and pay for your cover directly with the insurer.

For singles, an appropriate level of cover must have an excess of $500 or less. Couples or families must have an excess of $1,000 or less.

General cover, commonly known as ‘extras’, is not private patient hospital cover. It covers items such as optical, dental, physiotherapy or chiropractic treatment.

We will apply the rate of MLS that corresponds with your income for MLS purposes. If you have to pay the surcharge, it will be included with the Medicare levy and shown as one amount on your notice of assessment called Medicare levy and surcharge.

The family income threshold is increased by $1,500 for each MLS dependent child after the first child.

 Private health insurance (PHI) rebate

The private health insurance (PHI) rebate is an amount the government contributes towards the cost of your private health insurance premiums. Your eligibility to receive a PHI rebate will depend on your single or family income for surcharge purposes.

You can either receive this rebate upfront through a reduction in the cost of your premiums from your insurer, or as a refundable tax offset when you lodge your tax return.

The rebate percentage is adjusted on 1 April each year by a rebate adjustment factor.

Senior Australians

If you are a Senior Australian, you may be eligible for the seniors and pensioners tax offset. The seniors and pensioners tax offset (SAPTO) can reduce the amount of tax you are liable to pay. In some cases, this offset may reduce your tax liability to zero and you may not have to lodge a tax return. To be eligible for this tax offset, you have to meet certain conditions relating to your income and eligibility for an Australian Government pension.

If you are a senior, you must meet the age requirement for the Age pension to be eligible for the offset. In some cases, you may also be able to transfer your eligible spouse’s unused SAPTO to you. The ATO calculate their transfer amount available and include this amount when calculating your SAPTO.

Super related tax offsets

There are two super-related tax offsets for which you may be eligible:

Australian super income stream tax offset

If you receive income from an Australian super income stream, you may be entitled to a tax offset equal to:

• 15% of the taxed element, or
• 10% of the untaxed element.

The tax offset amount available to you will be shown on your payment summary. You’re not entitled to a tax offset for the taxed element of any super income stream you receive before you turn 57 years old unless the super income stream is either a:

• disability super benefit, or
• death benefit income stream.

You’re not entitled to a tax offset for the untaxed element of any super income stream you receive before you turn 60 years old unless:

• the super income stream is a death benefit income stream; and
• the deceased died after they turned 60 years old.

Tax offset for super contributions on behalf of your spouse

If you make contributions to a complying superannuation fund or a retirement savings account (RSA) on behalf of your spouse (married or de facto) who is earning a low income or not working, you may be able to claim a tax offset.

You will be entitled to a tax offset of up to $540 per year if you meet all of the following conditions:

• the sum of your spouse’s assessable income, total reportable fringe benefits amounts and reportable employer super contributions was less than $37,000
• the contributions were not deductible to you
• the contributions were made to a super fund that was a complying super fund for the income year in which you made the contribution
• both you and your spouse were Australian residents when the contributions were made
• when making the contributions you and your spouse were not living separately and apart on a permanent basis.

The tax offset for eligible spouse contributions can’t be claimed for super contributions that you made to your own fund, then split to your spouse. That is called a rollover or transfer, not a contribution.

Low income earners

You may be eligible for a tax offset if you are a low-income earner – for example, if you work part time.

You don’t have to claim this offset. The ATO will work it out for you when you lodge your tax return.

Zones and overseas forces

If you live or work in a remote area or serve in forces overseas, you may be eligible for one of the following:

Zone tax offset

To qualify for the zone tax offset, you must have lived or worked in a remote area (not necessarily continuously) for:

• 183 days or more during the current income year; or
• 183 days or more in total during the current and previous income years – but less than 183 days in the current year and less than 183 days in the previous income year – and you did not claim a zone tax offset in your previous year’s tax return.

If you lived in a zone for less than 183 days in the current income year, you may still be able to claim a tax offset as long as you lived in a zone for a continuous period of less than five years and:

• you were unable to claim in the first year because you lived there less than 183 days; and
• the total of the days you lived there in the first year and in the current year is 183 or more.

Overseas forces tax offset

You may be eligible for an overseas forces tax offset if you serve in a specified overseas locality as a member of one of the following:

• Australian Defence Force
• Australian Federal Police, or
• a United Nations armed force, and income relating to that service is not specifically exempt from tax.

Periods of service for which your income was exempt foreign employment income are excluded in working out your eligibility for the tax offset. To claim the full tax offset, you must have served in an overseas locality for 183 days or more in the income year. If your overseas service was less than 183 days, you may be able to claim part of the tax offset. If you qualify for both an overseas forces and a zone tax offset, you can claim only one of them, but you may claim the highest one.