Understanding the Seniors and Age Pension Tax Offset (SAPTO)

The Seniors and Age Pension Tax Offset (SAPTO) is a non-refundable tax offset designed to assist eligible Australian seniors and pensioners by reducing their taxable income. This offset is available to individuals who receive an age pension from Centrelink or certain other eligible pensions.

Eligibility for SAPTO

To be eligible for SAPTO, individuals must meet the following criteria:

1. Be an Australian resident
2. Be aged 60 or older (55 or older for recipients of Veterans' Affairs pensions)
3. Receive an age pension, disability support pension, or other specified pensions

• You were age-pension age and eligible for an Australian Government age pension during the income year, but you didn't receive it because you didn't make a claim or because of the income test or assets test. You must also meet one of the following conditions:  
  • You had been an Australian resident for age-pension purposes for 10 years or more. At least 5 years were continuous.
  • You had a qualifying residence exemption. This is because you arrived in Australia either  
    • as a refugee
    • under a special humanitarian program.
      
      Please note there are a number of other special measures.

4. Have a rebate income within the applicable thresholds

Rebate Income Thresholds

The SAPTO is subject to rebate income thresholds, which determine the maximum offset amount an individual can claim. The rebate income threshold for a single person is $50,119, while for a couple living together, it is $41,790. For couples living apart due to illness, the rebate income threshold is $47,599.

Offset Amounts

The maximum SAPTO amounts for the 2023-24 income year are:

• Single: $2,230
• Each partner of a couple: $1,602
• Each partner of an illness-separated couple: $2,040

Rates and thresholds for seniors and pensioners tax offset

• To be entitled to the offset, your rebate income must be less than the relevant cut-out threshold in the table below. You receive the maximum offset if your rebate income is less than the shading-out threshold.

Rates and rebate income thresholds for SAPTO
Status	Maximum tax offset amount	Shading-out threshold	Cut-out threshold
Single	$2,230	$32,279	$50,119
Each partner of a couple	$1,602	$28,974	$41,790
Each partner of an illness separated couple	$2,040	$31,279	$47,599

• If more than one item in the table above applies to you during the income year, we base your offset on the amount giving you the greatest entitlement.
• E.g. A single person earns $32,279.00 in a financial year. There is no tax payable (The maximum tax offset is 2,230) If you earn more than $50,119.00, you pay tax at the Marginal tax rates.

Tax Offset Reduction

The SAPTO is gradually reduced as rebate income exceeds the applicable thresholds. For every dollar of rebate income above the threshold, the offset is reduced by $0.125.

Example Calculations

Consider the following examples to illustrate how the SAPTO works:

Example: Single Pensioner

• Income: $40,000
• Rebate Income: $38,000 (Total income minus tax-exempt income)
• SAPTO Eligibility: Yes (Rebate income within the threshold)
• Maximum SAPTO: $2,230
  • Total Tax payable with SAPTO benefit is $2,465.62
  • Total Tax payable without SAPTO benefit is $4,367.00

Click here to use an online tax calculator that will illustrate the difference between ordinary taxation and inclusion of SAPTO (A tick box on the site)

Conclusion

The Seniors and Age Pension Tax Offset (SAPTO) provides valuable financial assistance to eligible Australian seniors and pensioners. Understanding the eligibility criteria, rebate income thresholds, and offset reduction factors is crucial for maximizing this benefit.

Why not take the next step and talk to a qualified financial planner? 

LifeTime Financial Group are specialist (holding appropriate accreditations) advisors who are ideally positioned to assist you with potentially accessing your financial planning needs. 

If you would like to discuss your wider financial planning needs, why not call us today on 03 9596-7733? There is no cost or obligation for our initial conversation/meeting.

Alternatively, please make an appointment using our online Book an appointment (Blue button above)

Why not take the next step and talk to a qualified financial planner? 

LifeTime Financial Group are specialist (holding appropriate accreditations) advisors who are ideally positioned to assist you with your SMSF requirements. 

If you would like to discuss your wider financial planning needs, why not call us today on 03 9596-7733? There is no cost or obligation for our initial conversation/meeting.

Alternatively, please make an appointment using our online Book an appointment (Blue button above)

LifeTime Financial Group. A leading privately-owned Melbourne-based Financial Planning practice with no ties to any financial institution.