Senior Australian and Pensioner Tax Offset (SAPTO) explained

Monday, 11 November 2013

After working (and paying taxes) for most of your life, it can be a good feeling to get to that stage of your life where it's time to get some pay-back from the taxman. Your golden years can be given an extra glow by qualifying for the Senior Australian and Pensioner Tax Offset (SAPTO).

To get a tax offset is another way of saying you get to reduce your tax bill. But an offset doesn't lessen “taxable income”, just the tax owing on it. So it can reduce tax to zero in theory, but will never in itself result in a refund. Since receiving the offset will make you liable for less tax, you can earn more income efore paying any tax (and the Medicare levy). In fact the intention of SAPTO is so that lower income seniors have little or no tax liabilities.

SAPTO, by the way, is an amalgamation of two previous offsets, the Senior Australian Tax Offset (SATO) and Pensioner Tax Offset (PTO). The previous offsets were last able to be claimed in the 2011-12 income year. The new SAPTO can be claimed from the 2012-13 income year onward.

Generally, due to the merging of the offsets, people who will be able to access this concession are either of the following two types of taxpayers:

  • a taxpayer who during the income year:
  • is eligible for a pension, allowance or benefit under the Veterans’ Entitlement Act 1986,
  • has reached pension age under that act, and
  • is not in gaol (yes, really)
  • a taxpayer during the income year who:
  • is qualified for an age pension under the Social Security Act 1991, and
  • is not in gaol.
This definition means veterans who were eligible for a pension but did not receive one (perhaps due to not meeting the income or asset requirements) and persons not meeting the residency requirements for an aged pension, but were eligible for that pension using an alternate test, could be able to access this offset.

TIP: The Low Income Tax Offset (LITO) of up to $445 in 2012-13 ($1,500 in 2011-12) may also apply in conjunction with SAPTO. 

NOTE: The government amended the SATO regulations affecting the calculation of the rebate threshold, with effect from July 1, 2010. This measure ensured that in situations where the rebate threshold exceeds $30,000, the calculation of the rebate threshold incorporates the reduction in the LITO.
The table below details the offset thresholds and maximum offset rates.
SAPTO 2013 - 14
Rebate income
Eligibility condition Threshold max tax offset applies Above threshold no longer eligible Maximum Rebate Amount
You did not have a spouse and your rebate income was less than… $32,279 $50,119 $2,230
You had a spouse and the combined rebate income of you and your spouse was less than… 57,948 83,580 $1,602
At any time during the year you and your spouse had to live apart due to illness or because one of you was in a nursing home and the combined rebate income of you and your spouse was less than… 62,558 95,198 $2,040
No change to the maximum tax offset values or the reduction rate 12.5 cents applied for every $1 over the maximum rate threshold up to the cut off threshold.
However it should be noted that calculating the SAPTO can be finicky and complex, especially where taxpayers are part of a couple where both partners are eligible. The difficulty lies in working out the amount of unused SAPTO transferred between the couple. The reason this may cause confusion is because this part of the calculation may be based on rates and thresholds from previous financial years.

There are some handy calculators on the Tax Office website, which can be found here.
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