Pensioners Below Seniors Age: Increase In Effective Tax Free Threshold

May 22, 2001

NO.036

Pensioners Below Seniors Age: Increase In Effective Tax Free Threshold

The Government has announced an increase in the pensioner rebate for

individuals not of age pension age to $1,608 and to $1,155 each for couples,

with effect from the current 2000-01 income year.

The higher rebates will allow individual pensioners below age pension age to

have income up to $15,970, without paying income tax. This compares to $12,652

in 1999-00. Couples with equal incomes will be able to have income up to $26,606

combined without having to pay income tax, compared to $21,524 in 1999-00.

The increase in the Medicare levy threshold to $15,970 for single pensioners

below seniors age, also announced in this Budget, will ensure that such

pensioners with incomes up to $15,970 are completely free from income tax and

Medicare levy. See Press Release No. 35 Senior Australians and Pensioners:

Increase in Medicare levy threshold.

Combined, these measures deliver a benefit of $40m in 2000-01 to 130,000

pensioners of less than seniors age.

Pensioners entitled to the new rebate on incomes less than $15,970 will now

not be obliged to lodge tax returns as a result of the Governments measures.

Such pensioners who have had tax amounts withheld will receive a refund when

they lodge their 2000-01 income tax return.

The cut-off thresholds for the rebates are $28,323 for individuals, $22,035

for each member of a couple and $26,421 for each member of a couple separated by

illness. All persons with taxable incomes up to those amounts will pay less tax

as a result of this measure.

The regulations giving effect to the increased rebates were gazetted on 11

May 2001.

Further details of the new rebate levels are attached.

22 May 2001

CANBERRA

TABLE 1

BELOW AGED PENSIONER TAX OFFSET

FOR PENSIONERS UNDER AGE PENSION AGE

LEVELS AND THRESHOLDS FOR 2000-2001

Age and family Situation	Tax offset level $ (a)	Shade-out threshold $ (b)	Cut-out threshold $ (b)

PENSIONER BELOW AGED PENSION AGE(d)

Single	1,608	15,459	28,323
Couple (each) (e) (f)	1,155	12,795	22,035
Couple separated because of illness (each) (e) (g)	1,471	14,653	26,421

FOOTNOTES

(a)	The below aged pensioner tax offset levels are sufficient to ensure that single pensioners who are below aged pension age receiving the full-rate of pension for the full year (and non-pension taxable income of $2,756), and pensioner couples who are below aged pension age receiving the full-rate of pension (and non-pension taxable income of $4,888 combined), will not be required to pay tax.
(b)	The shade-out threshold is the maximum taxable income at which a below aged pensioner is entitled to the full below aged pensioner tax offset. The tax offset reduces by 12.5 cents for each dollar of taxable income in excess of the shade-out threshold. The below aged shade-out threshold does not allow for the low income tax offset.
(c)	The cut-out threshold is the level of taxable income at which the tax offset reduces to nil. At or above this level of taxable income there is no entitlement to the below aged pensioner tax offset.
(d)	The below aged pensioner tax offset is available to people who receive Commonwealth of Australia government pensions and allowances who have not reached pension age within the meaning of the Social Security Act 1991. The tax offset does not apply to pensions that are not taxable.
(e)	In the case of a partnered pensioner, any unused portion of the tax offset is transferable to his or her partner. Taxation Ruling TR 93/31 explains how to calculate the unused portion of pensioner tax offset to be transferred to the other partner, and the adjusted tax offset threshold for the partner to whom any unused pensioner tax offset has been transferred.
(f)	A person who, at the time immediately before 12 March 1992 and at all times since, has been a married pensioner receiving a social security pension whose spouse has not been receiving a social security or service pension or social security benefit, is entitled to the tax offset and threshold at the single rate.
(g)	Pensioner couples separated because of illness receive the (higher) single rate of payment but the same income test free area as other pensioner couples. Therefore, the tax offset level for this category is higher than the level for pensioner couples not separated because of illness but lower than that for single pensioners.