The Victorian State Budget 2017: Winners or Losers
Reduce your tax payable through tax offsets and rebates!
Many individuals quite often ask the same question surrounding the topic of ‘how to save money on tax’. Besides the allowable deductions according to ATO; options such as negative gearing on an investment, salary sacrifice, so on and so forth, there are tax offsets and rebates that can also reduce the amount of tax payable on your income.
Although these offsets and rebates cannot turn your return into a refund on its own, it can help in lowering the tax payable to zero!
Below we shall address the available tax rebates and offsets briefly:
- Health Insurance
The entitlement to a Private Health Insurance Rebate or offset is dependent on your income level in that financial year.
When you are lodging your individual tax return and if your income is more than a certain amount, the private health insurance rebate will reduce and even at times, can turn into a liability. The rebate is claimable either through a refundable tax offset in the tax return, or through a premium reduction which will lower the policy price that is charged by you by your insurer.
Therefore the tax offset or liability will depend on how you are going to claim the rebate, the level of rebate that you have claimed on your policy and what your income for Medicare Levy Surcharge purposes is.
- Government Benefit Recipients
If you receive certain Australian Government allowances and payments, you may be entitled to a beneficiary tax offset.
The beneficiary tax offset may reduce your tax payable to zero if you have only received the qualifying Government benefits and allowances and have no other sources of taxable income. It is important to make sure that you declare this income at the correct item for ATO to automatically calculate the offset for you.
If you have other sources of taxable income, you may still have some tax to pay.
- If you maintained an invalid or invalid carer
You may be entitled to a tax offset if you maintained an invalid or invalid carer who is:
- Your spouse
- Your child aged 16 years or older
- Sibling aged 16 years or older
- Spouse’s child aged 16 years or older
- Spouse’s sibling aged 16 years or older
- Parent
- Spouse’s parent
To be entitled to the offset, they must be one of the above, and they must be receiving either one of the following
- Disability support pension under Social Security Act 1991
- Special needs disability support pension under the Social Security Act 1991
- An invalidity service pension under the Veteran’s Entitlement Act 1986
- Low Income Earners
If you are a low income earner and are an Australian resident for tax purposes, you may be eligible for a low income earners tax offset which can reduce your tax payable to zero but it will not reduce your Medicare Levy.
The full tax offset of $445 applies if your taxable income is under $37,000 or less or the amount will be reduced by 1.5 cents for each dollar over $37,000 up to $66,667 which is the limit.
This offset does not need to be claimed in the tax return as it will be automatically calculated when the tax return is processed.
- Medical Expenses
An offset that is currently being phased out, the last year to claim a medical expense tax offset will be the 2018-19 financial year which is restricted to net eligible expenses for disability aids, attendant care or aged care.
The net expense value is the total eligible medical expenses minus refunds that you, or someone else would have received from National Disability Insurance Scheme (NDIS) or private health insurers.
Similar to Private Health Insurance rebate, this offset is calculated based on your adjusted taxable income and family status.
- Senior Australians
As an Australian Senior, you may be eligible for the Seniors and Pensioners Tax offset (SAPTO) which could possible reduce your tax liability to zero.
In order to be eligible for this offset, you must meet both the age requirement for the Age pension and meet certain criteria’s relating to your income and eligibility for an Australian Government pension or allowance.
The amount of offset you may be eligible for (this could be a full, partial or nil offset), will depend on your rebate income as well as your spouse’s rebate income as the test will be done based on your combined rebate income.
If you and your spouse both are eligible for SAPTO and your spouse has unused offset, there are cases where the unused offset can be transferred into your tax return.
- Zone and Overseas Forces
For those living in a remote area or serve in forces overseas, one may be eligible for Zone Tax Offset and Overseas Forces Tax Offset.
An individual may qualify for both remote area and overseas zone offset, however you can only choose one of them and therefore you can choose the offset which gives you the highest benefit.
A Zone tax offset, is eligible for an individual whose usual place of residence is in a remote or isolated area in Australia, depending on the area, the offset amount will differ.
Overseas forces tax offset is eligible for members who are in the Australian Defence Force, the Australian Federal Police in the United Nations peacekeeping force in Cyprus, a United Nations armed force and being in a specified overseas locality.
The number of days that you have served in an overseas locality will also determine the amount of offset that you are eligible for.
- Super related tax offsets
Two super related offsets that an individual may be eligible for are mentioned below:
Australian super income stream offset: If you had received an income from an Australian super income stream, you may be eligible for tax offset equal to 15% of the taxed element, or 10% of the taxed element. This offset amount will show on your payment summary.
If you had taken out the super income stream before you receive your preservation age, you will not be entitled to a tax offset for the taxed element unless it is for a disability super benefit, or a death benefit income stream.
If you take out your super income stream before you turn 60, you will not be entitled to a tax offset for the untaxed element unless it is a death benefit income stream and the deceased died after they turned 60 years old.
Tax offset for super contribution on behalf of your spouse: If you had made a contribution to a complying superannuation fund or retirement savings account on behalf of your spouse who is either not working, or is a low income earner, you may be able to claim a tax offset of up to $540 per year if you meet certain criteria. These criteria’s are outlined in detail on the ATO website.
The above offset is a brief guide to the different types of offset available to individual tax payers however if you would like a more detailed guide on a specific offset which you believe you are entitled to, give us a call today at A One Accountants or email us at info@a1accountants.com.au and we shall do our best to assist you.
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