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Senior Australians or pensioners may be eligible for an offset that allows them to earn more income before they have to pay tax and the Medicare levy.

As we saw earlier, if you are under the pension age (currently 65.5 and increasing to 67 in 2023 and 70 by 2035), you can earn an income of up to $20 542 before any tax is payable (see p. 14).

The tax rules get even better when you reach age pension age (or service pension age), as you may be able to access more generous tax-free thresholds, known as the senior and pensioner tax offset (SAPTO). Table 1.3 shows the thresholds for the SAPTO.

Table 1.3: thresholds for senior and pensioner tax offsets (SAPTO) (2017–18)

* Maximum offset reduced by 12.5 cents for each $1 in excess of shaded-out threshold.

** A taxpayer's taxable income is taken to be half the couple's combined taxable income.

source: © Australian Taxation Office for the Commonwealth of Australia.

TIP

Senior Australians are not required to pay any income tax if their income is below $32 279 for singles (or $28 974 each for couples). But if senior Australians derive income from a share portfolio they are encouraged to lodge a tax return, as they will receive a nice refund from all of the excess franking credits attached to their dividends.

TAX FACT

If you're single, you can earn up to $32 279 (and $28 974 each for couples) in non-super income without paying a cent of tax because of the application of SAPTO and LITO. Any additional superannuation benefit that you receive from a taxed source is tax-free.

TIP

Senior Australians who are over Age Pension age but still participate in the workforce can keep more of their pension when they have earnings from working via the Work Bonus incentive. The Work Bonus allows an eligible pensioner to earn an extra $250 per fortnight from employment before it affects their pension rate. Single pensioners can effectively earn $414 per fortnight (being $250 from Work Bonus and the $164 income test free threshold) and still receive the maximum rate of pension.

Any unused part of the $250 fortnightly Work Bonus exemption amount can be accrued in a Work Bonus income bank, up to a maximum of $6500. The income bank amount is not time limited; if unused, it can carry forward into future years.

TIP

Senior Australians who are not eligible for a pension due to their income or assets, may still be eligible for a Commonwealth Seniors Health Card provided that they continue to reside in Australia and their adjusted taxable income is below:

•$52 796 a year if you're single

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