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Claiming tax offsets and rebates

Tax offsets (also known as ‘rebates’) can directly reduce the amount of tax payable on a person’s taxable income. While claiming certain tax offsets can reduce a person’s tax payable to zero, on their own, they cannot create a tax refund.

Here are three common types of tax offsets some individuals are eligible to claim:

Health insurance
A person’s entitlement to a private health insurance rebate or tax offset depends on their income level. For those who have private health insurance:
You can claim your private health insurance rebate as a premium reduction, which lowers the policy price charged by your insurer, or as a refundable tax offset through your tax return.

Low-income earners
Some Australians may be eligible for a tax offset if they are considered to be a low-income earner and are an Australian resident for income tax purposes.The offset can only reduce the amount of tax they pay to zero and it does not reduce their Medicare levy.

If your taxable income is less than $66,667, you will get the low-income tax offset. The maximum tax offset of $445 applies if your taxable income is $37,000 or less. This amount is reduced by 1.5 cents for each dollar over $37,000.

If you are under 18 as at 30 June of the income year and you have unearned income, your low-income tax offset cannot reduce the tax payable on this income.

Seniors and pensioners tax offset
Senior Australians may be eligible for the seniors and pensioners tax offset (SAPTO). The SAPTO can reduce the amount of tax you are liable to pay. In some cases, it 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 or allowance. If you’re a senior, you must meet the age requirement for the Age pension. This includes if you qualified for the Age pension, but did not receive it.

Posted on 7 November '16 by , under Tax.

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Transition to retirement

The transition to retirement (TTR) strategy allows you to access some of your super while you continue to work.

You are able to use the TTR strategy if you are aged 55 to 60. You can use it to supplement your income if you reduce your work hours or boost your super and save on tax while you keep working full time.

  • Starting a TTR pension: To start your TTR pension, transfer some of your super to an account-based pension. You have to keep some money in your super account so that you can continue to receive your employer's compulsory contributions as well as any voluntary contributions you may be making.
  • Government benefits and TTR: The benefits you or your partner receive might be impacted if you choose to opt for this strategy. How and what exactly will change might become clearer upon discussing this with a Financial Information Service (FIS) officer.
  • Life insurance and TTR: In some cases, the life insurance cover you have with your super may stop or reduce if you start a TTR pension – check this before making any decisions or changes.

TTR can help ease your mind as you transition into retirement but it can be a bit complex. Before you choose whether you want to use TTR to reduce work hours or save on tax, or even if you want to use TTR altogether, you should figure out how this will impact all aspects of your finances.

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