Introduction
Navigating tax rules in retirement can be complex, but understanding the available offsets can significantly reduce your tax liability. For Australians aged 65 and over, key opportunities include the Seniors and Pensioners Tax Offset (SAPTO), Superannuation Income Stream Tax Offset, and additional strategies like spouse contribution offsets and government co-contributions.
1. Seniors and Pensioners Tax Offset (SAPTO)
SAPTO is designed to reduce or even eliminate income tax for eligible seniors and pensioners by increasing your tax-free threshold.
Eligibility Criteria:
Eligible for an Australian Government pension or allowance (e.g., Age Pension, Carer Payment).
Income limits apply:
Single: Full offset up to $2,230 if income is below $32,279; phases out at $50,119.
Couple (each): Up to $1,602 if income is below $28,974; phases out at $41,790.
Couple separated due to illness: Up to $2,040 each.
Residency requirements apply.
Benefits:
Non-refundable offset applied at assessment.
Unused portions can transfer between spouses.
Combined with the Low Income Tax Offset, singles can earn up to $33,000 tax-free, couples about $30,500 each.
2. Superannuation Income Stream Tax Offset
If you receive regular payments from your super fund, you may qualify for a tax offset that reduces tax on these payments.
Key Points:
Age 60+: Income from a taxed super fund is generally tax-free.
Preservation age to 59: Taxed element eligible for a 15% offset.
Untaxed element after 60: Eligible for a 10% offset, capped at $11,875 for 2024–25.
Payments from taxed funds after age 60 are non-assessable, non-exempt income.
Considerations:
Transfer balance cap: Currently $1.7 million.
TRIS remains taxable until age 65 or full condition of release.
3. Spouse Contribution Offset
Boost your spouse’s super and reduce your tax with a contribution offset of up to $540.
Eligibility:
Spouse’s income below $40,000.
Maximum offset applies when income is $37,000 or less.
Contributions must be non-concessional and up to $3,000 for full offset.
4. Government Co-Contribution
The government may contribute up to $500 to your super if you make personal after-tax contributions.
Key Points:
Available to low and middle-income earners (up to $58,445 for 2024–25).
Lodge a tax return and make a personal contribution.
Maximum co-contribution applies when income is $43,445 or less and you contribute $1,000.
Practical Tips for Seniors
Check eligibility annually: Rules and thresholds change.
Combine offsets: SAPTO, super offsets, spouse contributions, and co-contributions can work together.
Plan withdrawals: Align pension payments with minimum drawdown rules.
Seek advice: Professional guidance ensures compliance and maximises benefits.
Need Help?
Our team specialises in retirement tax strategies for seniors. Contact us today to review your eligibility and optimise your tax position.