What is Tax Offset?
Tax Offsets (aka Rebates) such as low and middle income tax offset can reduce your tax liability to even $0 or Maximise your tax refund. There are two (2) different category of tax offsets:
Non-refundable Tax Offset:
Comprises of low income tax offset; and low and middle income tax offset, which can reduce the amount of tax payable if you meet the eligibility criteria. Generally, tax offsets can reduce your tax payable to nil, however, on its own, they cannot issue you a refund.
Refundable Tax Offset:
Can directly reduce the amount of tax you are liable to pay to an amount less than zero, which results in a Tax Refund; see list of refundable tax offsets Australia.
Note: Tax Offsets differs from tax Deductions. A tax offset reduces the amount of tax you have to pay. A tax Deduction reduces your Taxable Income.
Non-refundable Tax Offsets
To be eligible for non-refundable tax offsets you must be an Australian resident for income tax purposes and pay tax on your taxable income. Depending on your income you may be eligible for both the low income tax offset and low and middle income tax offset.
Low Income Tax Offset (LITO)
If you have private health insurance, the rebate you receive is reduced if your income is more than a certain threshold. This rebate is determined and automatically calculated by the ATO.
Low and Middle Income Tax Offsets (LMIT)
LMITO is in addition to the low income tax offset, to be eligible you must be an Australian resident for tax purposes and pay tax on taxable income.
- this offset is available from 1/07/2018 to 30/06/2022.
- if your taxable income is between $37,001 to $126,000, you get some or all of this offset, click here to see how is calculated.
- this offset has been abolished from 1/07/2022
Refundable Tax Offsets
To be eligible for non-refundable tax offsets you must be an Australian resident for income tax purposes and pay tax on
your taxable income. Depending on your income you may be eligible for both the low income tax offset and low and middle income tax offset.
Private Health Insurance Rebate
To be eligible for LITO you must be an Australian resident for tax purposes and pay tax on taxable income. LITO is determined and automatically calculated by the ATO. The maximum amount of LITO is $445 if your taxable income is:
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Senior Australians and Pensioners Tax Offsets (SAPTO)
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- If you meet the senior tax offset eligibility criteria, you may be eligible for SAPTO. But, you cannot claim the SAPTO if you were in jail for the whole financial year. The SAPTO is determined and automatically calculated by the ATO. The SAPTO is a non-refundable tax offset. If you and your spouse are both eligible for SAPTO, you may be able to transfer your spouse’s unused tax offset to your return. The ATO will calculate your spouse’s transfer amount and include it in your tax return.
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National Rental Affordable Scheme Tax Offset (NRAS)
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The Australian Government pays NRAS contribution via refundable tax offsets. Eligible investors can claim the tax offset through:
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- in your (individual, corporate or super fund) annual tax return
- lodge via a short-form application if you are an income tax exempt entity who would not normally lodge a tax return.
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An individual, corporate tax entity or super fund is eligible to claim an NRAS refundable tax offset if both of the following are met:
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- You have issued with a Certificate from the Housing Secretary under the NRAS.
- The financial year begins in the NRAS year to which the Certificate relates.
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The NRAS tax offset is a refundable tax offset. this mean it can reduce the amount of tax you have to pay to an amount less than $0, which results in a refundable amount.
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