alt=""/> PITFALL
It is important to conservatively estimate your family income for the purposes of the Child Care Subsidy, because if you overestimate it you may need to pay back some or all of what you received during the year (even allowing for the 5 per cent amounts previously withheld by Services Australia).
Under the No Jab No Pay legislation, if your children (up to the age of 19) do not meet the immunisation requirements then you will not be eligible for Child Care Subsidy. Your child must be fully immunised, on a catch-up schedule or have a valid exemption in order to receive these payments. Note that while conscientious objection is not considered an exemption category, children with verified medical exemptions by a General Practitioner such as medical contraindication, natural immunity or participation in a recognised vaccine study are allowed.
7 LOW-INCOME EARNERS
There are a few tax benefits available if you are a low-income earner, such as when you work part time.
Low-income tax offset
The low-income tax offset (LITO) is a tax rebate for individuals on lower incomes. In 2022–23, the LITO will provide a tax rebate of $700 for individuals who earn less than $37 500. The offset is reduced by 5 cents for every dollar that your taxable income exceeds $37 500 up to $45 000. The offset is then reduced by 1.5 cents for every dollar that your taxable income exceeds $45 000, before phasing out entirely at $66 667.
To be eligible for LITO, you must be a resident for tax purposes and lodge a tax return. The ATO will automatically apply this offset to your assessment for you if you're entitled to it. Minors cannot use the LITO to reduce tax payable on their unearned income.
Low and middle income tax offset
In addition to LITO, the government reinstated the low and middle income tax offset (LMITO) in the 2021–22 federal budget for the 2021–22 year only. The 2022–23 federal budget proposed an increase of $420 to LMITO such that it will be an additional tax rebate of $675 for individuals who earn less than $37 000. The offset is increased by 7.5 cents for every dollar to $48 000 and stays at $1500 for taxable incomes up to $90 000. The offset is reduced by 3 cents for every dollar that your taxable income exceeds $90 000, before phasing out entirely at $126 000.
Low-income earners can effectively earn up to $25 437 each year tax-free after the LITO of $700 and LMITO of $675 is taken into account. So if you have a spouse who is not working, consider an income-splitting strategy to save as much as $12 337 in tax.
Superannuation co-contribution
If your total superannuation balance is under $1.7 million and your total income is under the low-income threshold of $42 016 and you contribute $1000 post-tax to your super fund, the government will match it by 50 per cent with a further $500. The super co-contribution gradually phases out to nil (by 3.333 cents per dollar) at the higher income threshold of $57 016.
Superannuation spouse contribution tax offset
You are entitled to a rebate of up to $540 if you make contributions into your spouse's superannuation fund, if your spouse's assessable income and reportable fringe benefits are less than $40 000.
The rebate is 18 per cent of the lesser of:
$3000 reduced by $1 for every dollar that your spouse's assessable income and reportable fringe benefits exceed $37 000
the total of the eligible spouse contribution.
The ATO outlines that tax offsets and tax deductions are not the same. Tax offsets are taken directly off your tax, while tax deductions are taken off your assessable income, which is used to calculate your tax. So each $1 of tax offset means you pay $1 less tax, regardless of your taxable income.
Low-income superannuation tax offset
The government will contribute up to $500 annually into the superannuation account of workers on adjusted taxable incomes of up to $37 000 to ensure that no tax is paid on superannuation guarantee contributions.
Low-income health care card
In order to receive a low-income health care card your weekly gross income over an eight week period needs to be under certain income limits depending on your family circumstances. If you are single with no children you can earn up to $656 per week (or $1127 for a couple with no children). This increases to $1127 if you have one dependent child ($1161 for couples) and a further $34 for each additional child. You do not need to pass an assets test.
8 SENIOR AND PENSIONER TAX OFFSET
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 66.5 and increasing to 67 in 2023 and 70 by 2035), you can earn an income of up to $25 437 before any tax is payable (see p. 15).
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 1.5 shows the thresholds for the SAPTO.
TABLE 1.5: thresholds for senior and pensioner tax offsets (SAPTO) (2022–23)
Source: © Australian Taxation Office for the Commonwealth of Australia.
| Maximum offset | Shaded-out threshold (taxable income)* | Cut-out threshold (taxable income) | |
|---|---|---|---|
| Single | $2 230 | $32 279 | $50 119 |
| Couple (each) | $1 602 | $28 974** | $41 790** |
| Couple (combined) | $3 204 | $57 948 | $83 580 |
| Couple (separated by illness) | $4 080 | $62 558 |
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