Tax Offsets

Getting the numbers right
July 9, 2016
Investment Tax Tips
July 9, 2016

Tax offsets also sometimes referred to as rebates, directly decrease the amount of tax to be paid on your own taxable income.

Generally, offsets are effective in reducing your tax to be paid but by themselves they cannot get you a refund.

Health Insurance

Your entitlement to a private medical insurance rebate or tax offset depends upon your income. If you have private medical insurance:

•    the amount of private medical insurance rebate you have entitlement to receive is reduced in case your income is more than a specific amount

•    we will calculate how much private medical insurance rebate you have entitlement to receive when you lodge your tax return.

Most of the times this offset is directly claimed from your health fund provider. If you haven’t done so, we will then claim it when working on your tax returns.

If you receive Government Benefits

The beneficiary tax offset is available if you receive certain Australian Government allowances and payments.

You usually pay no tax for the year if you:

•    only receive any qualifying benefits and allowances, and

•    you have no other taxable income.

•    do have other assessable income you might still need to pay some tax.

•    have no tax payable, the beneficiary tax offset is not available for use.

If you maintained an invalid or invalid carer

You might be entitled to a tax offset if you have maintained an invalid career who was either your spouse or child aged 16 years or older or sibling aged 16 years or older or or spouse’s child aged 16 years or older or spouse’s sibling aged 16 years or older or parent or spouse’s parent and they should have received one of the following:

•    a disability support pension under the Social Security Act 1991

•    a special needs disability support pension under the Social Security Act 1991

•    an invalidity service pension under the Veterans’ Entitlement Act 1986.

Income tests

Income tests are commonly used to work out an individual’s eligibility for a variety of tax offsets and benefits, which often can reduce the amount of tax you may have to pay.

We use numerous items from your tax return when applying income tests. You need to make sure that you complete all items that apply to you in the income tests section of your return.

A number of offsets, advantages and obligations are evaluated using a family income threshold. If you have a spouse, you should incorporate your spouse’s income within the relevant section of your tax return.

Based on your circumstances, any of the following tests may be used to evaluate your entitlements:

•    Adjusted taxable income (ATI)

•    Rebate income

•    Income for Medicare levy surcharge purposes

•    HELP and SFSS repayment income

•    Super income tests

Low income earners

You might be eligible for tax offset if you are a low-income earner and you are an Australian resident for taxation purposes.

You do not need to claim this offset. We are going to work it out for you when you lodge your taxes. The offset are only able to decrease the quantity of tax you pay to zero and it does not reduce your Medicare levy.

If your taxable income is less than $66,667, you will get the low income tax offset. The maximum tax offset of $445 applies if your taxable income is $37,000 or less. This amount is reduced by 1.5 cents for each dollar over $37,000.

If you are under 18 as at 30 June of the income year and you have unearned income, your low income tax offset cannot reduce the tax payable on this income.

Medical expenses

The net medical expenses tax offset is being phased out.

From 2015-16 until 2018-19, claims for this offset are restricted to net eligible expenses for disability aids, attendant care or aged care.

Net expenses are your total eligible medical expenses minus refunds from Medicare, National Disability Insurance Scheme (NDIS) and private health insurers which you or someone else, received or are entitled to receive.

This offset is income tested. If you are eligible for the offset, the percentage of net medical expenses you can claim is determined by your adjusted taxable income (ATI) and family status. The period you lived in a zone in the current income year must include the first day of the income year.

There are 3 more offsets and rebates which are Senior Australians and Pensioners, Super related tax offsets and Zones and overseas forces. We will be discussing these in our next blog.

Call Tax Accountants Cranbourne at 1300 300 106 today to your tax returns.