Pensioner tax offset
What is the pensioner tax offset?
The pensioner tax offset is available to anyone who receives an assessable pension, payment or allowance paid by the Commonwealth of Australia and who is not eligible for the Senior Australians tax offset.
The effect of the tax offset is to ensure that no tax is payable by a person whose assessable income consists of the full pension and, in some cases, a small amount of non-pension income.
If you were entitled to both:
- the beneficiary tax offset, and
- the pensioner tax offset,
you will receive the one that gives the higher tax offset.
What types of pension qualify?
A pension or similar type of payment qualifies if it is paid to you from either Centrelink or the Department of Veterans' Affairs, and is shown on your tax return.
The following pensions and similar type payments qualify:
- age pension
- bereavement allowance
- carer payment
- disability support pension (only if you have reached age pension age)
- mature age allowance (only if you were granted the allowance before 1 July 1996)
- parenting payment (single)
- widow B pension
- age service pension
- income support supplement
- invalidity service pension (if you have reached age pension age)
- partner service pension
- mature age partner allowance
- wife pension.
Claiming the pensioner tax offset
How to claim the pensioner tax offset
It is not necessary to claim the pensioner tax offset anywhere on your tax return. It is calculated by the ATO based on the type and amount of taxable income, and the tax offset code letter shown on your tax return.
Calculating the pensioner tax offset
The amount of pensioner tax offset you may receive depends on whether or not you had a spouse—married or de facto—while you were receiving a qualifying pension or allowance and whether or not you were living together. The figures shown apply to the 2001-02 financial year.
You were single, separated or widowed
If you were single, separated or widowed for any period during the financial year when you were receiving a qualifying pension or allowance, the tax offset is calculated using the following steps:
- Work out your taxable income from your return. If it is greater than $29 739, you are not entitled to any pensioner tax offset. If it is less than $16 059, you are entitled to the maximum tax offset of $1710
- Subtract $16 059 from your taxable income
- Divide the result of Step 2 by 8
- Subtract the result of Step 3 from $1710
- Round up to the nearest whole dollar.
Example
David is a single pensioner, who is not entitled to the Senior Australians tax offset. His taxable income for 2001-02 was $18 499. His tax offset is calculated as follows:
- Taxable income
$18 499 - Subtract $16 059 from David’s taxable income
$18 499 - $16 059
$2440 - Divide the result of Step 2 by 8
$2440 / 8
$305 - Subtract the result of Step 3 from $1710
$1710 – $305
= $1405 - Round up to the nearest whole dollar
$1405
You and your spouse lived together
If, at all times during the financial year when you were receiving a qualifying pension or allowance, you and your spouse lived together, the tax offset is calculated using the following steps:
- Work out your taxable income from your return. If it is greater than $23 284, you are not entitled to any pensioner tax offset. If it is less than $13 324, you are entitled to the maximum tax offset of $1245
- Subtract $13 324 from your taxable income
- Divide the result of Step 2 by 8
- Subtract the result of Step 3 from $1245
- Round up to the nearest whole dollar
Example
Judith is a married pensioner, who is not entitled to the Senior Australians tax offset. She lived with her husband David for the full financial year. Her taxable income for 2001-02 was $14 500. Her tax offset is calculated as follows:
- Taxable income
$14 500 - Subtract $13 324 from Judith’s taxable income
$14 500 - $13 324
$1176 - Divide the result of Step 2 by 8
$1176 / 8
$147 - Subtract the result of Step 3 from $1245
$1245 – $147
= $1098 - Round up to the nearest whole dollar
$1098
You and your spouse lived apart due to illness or infirmity
If you had a spouse for all periods during the financial year when you were receiving a qualifying pension or allowance, but for at least some of that time you and your spouse had to live apart due to illness or either of you was in a nursing home, the tax offset is calculated using the following steps:
- Work out your taxable income from your return. If it is greater than $27 837, you are not entitled to any pensioner tax offset. If it is less than $15 253, you are entitled to the maximum tax offset of $1573
- Subtract $15 253 from your taxable income
- Divide the result of Step 2 by 8
- Subtract the result of Step 3 from $1573
- Round up to the nearest whole dollar
Example
Mary is a married pensioner, who is not entitled to the Senior Australians tax offset. She has been in a nursing home for the full year. Her taxable income for 2001-02 was $16 873. Her tax offset is calculated as follows:
- Taxable income
$16 873 - Subtract $15 253 from Mary’s taxable income
$16 873 - $15 253
$1620 - Divide the result of Step 2 by 8
$1620 / 8
$202.50 - Subtract the result of Step 3 from $1573
$1573 – $202.50
= $1370.50 - Round up to the nearest whole dollar
$1371
Transfer of unused portion of tax offset
If you have an unused portion of your pensioner tax offset, the benefit may be transferred to your spouse if your spouse is eligible for the Senior Australians or pensioner tax offset. You do not need to claim this: the ATO will work it out for you.
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