Tax offsets or rebates are offered to lower the payable tax owed by a qualified taxpayer. The Australian Tax Office (ATO) defines a reduction in your taxable income for the given financial year. If you use offsets to their full capacity, you may be able to lower your taxable income to zero. However, the ATO notes that several tax offsets are “non-refundable,” which means you won’t get a tax refund. As a result, if you were liable for $5,500 in taxes and qualify for $6,000 in tax offsets, the $500 difference will be removed, and you would instead have a $0 tax liability.
Eligibility Criteria and Benefits of Tax Offsets
Australians are eligible for several tax offsets depending on a couple of factors defined by the ATO. Following are the types of tax offsets, their eligibility criteria, and benefits.
Low- and Middle-Income Earners
The Low and Middle-Income Offset (LMITO) and the Low Income Tax Offset (LITO) are two of the most prevalent tax credits available. Depending on their circumstances, people can also simultaneously qualify for the LITO and LMITO. According to the ATO, there is no need to do anything if you are entitled to one or both of these offsets because it will calculate them automatically when filing your tax return.
Many people working from home can claim tax deductions, lowering their taxable income. For example, if you meet ATO qualifying rules, you may be eligible to claim certain tax deductions.
Super-related Tax Offsets
According to the ATO, individuals who receive income from Australian superannuation or contribute to their spouse’s superannuation can take advantage of two tax breaks relating to their superannuation. Depending on your spouse’s age, total assessable income, and reportable fringe benefits, you may be able to get a tax break of up to $540 when making super contributions on their behalf, according to the ATO website.
Private Health Insurance Tax Offset
The Australian Government gives a private health insurance refund to increase the insurance rate in the Australian population. According to the ATO, renewing an authentic and affiliated private health insurance policy that delivers a “sufficient level of private hospital insurance cover” makes you eligible for this rebate. Depending on your income, you may be eligible for a percentage of your insurance premiums to be offset.
Seniors’ and Pensioners’ Tax Offset
The Seniors and Pensioners Tax Offset (SAPTO) is applied in the case of senior citizens. You are eligible for a tax offset if you are over 65 and receive an Australian government pension from the department of veterans affairs or Centre link. Regarding the age pension, the relaxation in the income and asset levels is also given exclusively for SAPTO. This relaxation entitles an old pensioner to qualify for the tax rebate even if the income or asset level doesn’t match the given criteria.
To determine whether or not you qualify for this tax-free benefit, you can check the ATO website or seek the advice of a tax professional.