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Offsets and Rebates in Australia Income Tax

Permanent residents of Australia or individuals holding an Australia PR visa can claim deductions for various expenses as notified in the Australian Income Tax law.


Apart from the above deductions, the Australia Income Tax law also allows offset of certain expenditure towards the income, which can reduce the tax liability of an individual to zero and in some cases refund of income tax.


As per the provisions laid in the Australia Income Tax law, expenses incurred in respect of the following are allowed as offsets and rebates :-

  • Payment of Health Insurance Policy

  • If an individual receives Government benefits

  • If an individual has maintained an invalid or invalid career

  • Income tests

  • Low income earners

  • Medical expenses

  • Senior Australians and pensioners

  • Super related tax offsets

  • Zones and overseas forces

1. Payment of Health Insurance Policy:- An individual’s entitlement to a private health insurance rebate or tax offsets depends on the age of the eldest person covered in the family and it also depends on the family income.


If an individual has a private health insurance:

  • The amount of private health insurance rebate is reduced if the individual has an income which is higher than a certain amount.

  • The rebate is generally calculated when an individual lodges the Australia Income Tax return.

The rebate for the health insurance can be claimed as the following:

  • How an individual claims a rebate for the premium for the health insurance premium

  • The level of rebate the individual claims for the policy.

  • The income the individual has subjected to medical levy proposes.

2. Individual Receiving Government Benefits:-The benefit offset is available only if the individual Australia Income Taxpayer receives any amount from the Australian government as allowances or as payments.


The individual is entitled not to pay tax if any of the following conditions occur

  • If the individual receives any of the qualify benefits and allowances

  • The individual has no other taxable income

To claim the offset, an individual must declare the payment you receive at the correct item on your tax return.


3. Income Tests:- Income tests are used to work out the eligibility of an individual for a number of tax offsets and benefits, which can reduce the amount of tax payable by an individual.


The income tests are used to assess the following tax offsets and other items in the tax return.


The Income tax offsets allowable in Australia Income tax or resident taxpayers in Australia are:

  • Net medical expenses tax offset for disability aids, attendant care and aged care

  • Invalid or invalid career tax offset

  • Seniors and pensioners tax offsets

  • Medical levy surcharge (lump sum payments in arrears) tax offset

  • Spouse super contributions tax offset

4. Low Income Earners:- Any individual who is an Australian resident is eligible for a tax offset if he or she is a low income earner.


This offset can be used only to reduce the tax payable by an individual and in no manner whatsoever reduces the chargeability of medical levy surcharge.


If the taxable income of the individual is less than $66,667, the Australia Income tax payer will get a low income offset. The maximum tax offset of $445 applies if the individual’s taxable income is $37000 or less. This amount is reduced by 1.5 cents per dollar over $37000.


5. Senior Australians & Pensioners:- If an individual is a senior Australian (an individual taxpayer who is above the age of 60 years) is eligible for the seniors and pensioners tax offsets (SAPTO)


The SAPTO can reduce the tax liability to zero. And in some cases, it might become refundable.


To be eligible for this tax offset, an individual needs to meet certain conditions relating to the income and eligibility as per the Australia government pension or allowance.

If an individual is a senior, he or she must meet the age requirement to be Senior Age pension.


6. Australian Super Income Stream Offset:- If an individual receives an income from an Australian super income stream, he or she is entitled to a tax offset equal to

> 15% of the taxed element

> 10% of the untaxed element


There is a limit of $10, 0000 on the amount of tax offset which an individual is entitled to on their untaxed element.


Tax offsets for super contributions on behalf of spouse


An individual is entitled to a tax offset of up to $540 per year if all the following conditions are met

  • In the income years prior to 2017-2018, the sum of the spouse’s assessable income, total reportable fringe benefits amount and reportable employer super contributions was less than $13,800.

  • For the income years 2017-2018 and later income years the sum of the spouse’s assessable income, total reportable fringe benefits amounts and reportable employer super contributions was less than $40,000 and the contributions were not deductible to you

7. Zones & Over seas Offsets:-

Zones offsets : An individual can claim deduction if the usual place of residence of the individual Australia income tax payer is in a remote or isolated area of Australia, not including an offshore oil and gas rig.


If the usual place of residence was in a zone for a period of less than 183 days in the income year, an individual can still be able to claim the tax offset, as long as the usual place of residence was in such a zone for a period of continuous five years and The individual was not able to claim in the first year because he lived in there for a period of less than 183 days.


The total of the days he lived there in the first year and the current income year is 183 or more. The period he lived in a zone in the current income year must include the first day of the income year.


Overseas offsets : An individual Australia Income Tax Payer is eligible for an overseas forces tax offset if he or she serves in a specified overseas locality as a member of the following government bodies:-

  • The Australian Defence Forces

  • The Australian Federal Police Services in the United Nations peacekeeping force in Cyprus

  • A united nations armed force, and the individual’s income relating to that service is not specifically exempt from tax.

To know about more ways to save Australia Income Tax click Here

To know about the different Australia Income Tax slabs click Here

To know about the projected Australia Income Tax slabs in Australia click Here