Tax offsets (often referred to as rebates) directly reduce the amount of tax you must pay. They differ from tax deductions, in that deductions reduce your total assessable income dollar-for- dollar and your tax payable at most by your marginal rate. Each dollar of tax offset reduces your tax payable by a dollar, regardless of your taxable income.
Tax offsets are used to:
• Introduce fairness in the way people in different circumstances are taxed – for example, the parent, spouse’s parent or invalid relative tax offsets compensate people for supporting family members.
• Encourage people to do some things the Government would like them to do – for example the government encourage people to take out private health cover in order to reduce the pressure on the public health system, by offering a refundable tax offset.
Tax offsets include:
1. Taxpayers with dependants
Taxpayers with dependants may be eligible for:
• Dependent spouse, parent or invalid relative tax offset.
• Housekeeper tax offset.
• Child-housekeeper tax offset.
2. Pensioners and Senior Australians
This offset allows eligible people to earn more income before they have to pay tax and the Medicare levy.
3. Superannuation
You may be entitled to a tax offset if you have income from an Australian superannuation stream and are:
• In receipt of a disability superannuation benefit or death benefit income stream.
• Aged 55 years or over.
4. Health Insurance
The private health insurance offset is a percentage of the premium you pay to a registered insurer for a complying private health insurance policy.
5. Low income earners
You don’t have to claim this offset – the ATO will work it out when you lodge your tax return to see if you qualify for this offset.
6. Medical Expenses
As of 1 July 2012, this offset is income tested. Speak with your accountant for more information.
7. Zones and overseas forces
Offsets are available for people who worked or lived in remote isolated areas of Australia, or served in the armed forces overseas.
If you would like more information on any aspect of taxation or tax law, our experienced team of tax lawyers and tax accountants can assist you. Call us today on 1300 QUINNS (784 667) or submit an online enquiry.
