When it comes to minimising tax as a senior Australian or pensioner, the senior and pensioner tax offset (SAPTO) may allow you to access more generous tax-free thresholds, meaning you can have a higher level of income before you are required to pay tax and the Medicare levy.
Those under the pension age (currently 65 but proposed to increase to 67 in 2023 and 70 by 2035) can earn an income of up to $20 542 before any tax is payable (taking into account all available benefits).
What are the tax-free income thresholds for seniors?
For pensioners and seniors, the thresholds are higher if you’re eligible for the SAPTO, as laid out in the table below.
Thresholds for senior and pensioner tax offsets (SAPTO) (2015–16)
|Maximum offset||Shaded-out threshold (taxable income)*||Cut-out threshold (taxable income)|
|Single||$2 230||$33 044||$50 884|
|Couple (each)||$1 602||$29 739**||$42 555**|
|Couple (combined)||$3 204||$59 478||$85 110|
|Couple (separated by illness)||$4 080||$64 088||$96 728|
* 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.
Even if you are not required to pay any tax (income below $33,044 for singles or $29,739 for couples), if you receive income from a share portfolio it is worth lodging a tax return as you can claim a refund on all of the excess franking credits attached to your dividends.
If you receive any additional superannuation benefit from a taxed source, it will be provided to you tax-free.
If you decide to sell your home
Seniors might worry that selling their home to downsize will result in surplus funds which get factored into means tests, resulting in reduced benefits. If they sell a family home which they have owned for at least 25 years, up to $200,000 of surplus funds generated from the sale may be invested in a savings account which will be exempt from the age pension means test for up to 10 years.
Summary of minimising tax as a senior:
- Seniors and pensioners may be entitled to the senior and pensioner tax offset (SAPTO), allowing them to receive a greater amount of income tax-free
- Those receiving income from shares, even if below the taxable threshold, should file a tax return to claim for franking credits
- Income up to $200,000 gained from selling a home owner for over 25 years can be invested in a savings account exempt from means testing for up to 10 years