Senior Australians: Increase In Effective Tax Free Threshold

May 22, 2001

NO.037

Senior Australians: Increase In Effective Tax Free Threshold

The Government will increase the maximum low income aged persons rebate and

pensioner rebate for persons of age pension age to $2,230 for singles and $1,602

for each member of a couple, with effect from the current 2000-01 income year.

This measure will allow senior Australians to have income of $20,000 without

paying income tax. This compares to $12,652 in 1999-00. Senior couples will be

able to have income of up to $32,612 combined without having to pay tax,

compared to $21,524 in 1999-00.

The increase in the Medicare levy threshold to $20,000 for senior

Australians, also announced in this Budget, will ensure that single senior

Australians with incomes up to $20,000 are completely free from income tax and

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

Increase in Medicare levy threshold.

Single senior Australians on incomes less than $20,000 will now not be

obliged to lodge tax returns as a result of the Governments measures. Senior

Australians on incomes less than $20,000 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 have increased to $37,840 for singles

and $29,122 for each member of a couple. All persons with taxable incomes up to

those amounts will pay less tax as a result of this measure.

The higher rebates will benefit around 375,000 senior Australians, including

200,000 age pensioners.

Full details of the new rebate levels are attached.

22 May 2001

CANBERRA

TABLE 1

AGED PENSIONER TAX OFFSET

FOR PENSIONERS OF AGED 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 AGED PENSION AGE(d)

Single	2,230	20,000	37,840
Couple (each) (e) (f)	1,602	16,306	29,122
Couple separated because of illness (each) (e) (g)	2,040	18,882	35,202

FOOTNOTES

(a)	The aged pensioner tax offset levels are sufficient to ensure that single aged pensioners pay no income tax on taxable incomes (including pensions) up to $20,000 in conjunction with the low income tax offset.
(b)	The shade-out threshold is the maximum taxable income at which an aged pensioner is entitled to the full tax offset. The tax offset reduces by 12.5 cents for each dollar of taxable income in excess of the shade-out threshold. The aged pensioner shade-out threshold also allows for the low income tax offset.
(c)	The cut-out threshold is the level of taxable income at which the aged pensioner tax offset reduces to nil. At or above this level of taxable income there is no entitlement to the aged pensioner tax offset.
(d)	The aged pensioner tax offset is available to those persons in receipt of a Commonwealth of Australia government pension or allowance and have reached pension age within the meaning of the Social Security Act 1991 or receive a pension, allowance or benefit under the Veterans Entitlement Act 1986 and have reached pension age under that Act. 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)	Aged pensioner couples separated because of illness receive the (higher) single rate of payment but the same income test free area as other aged 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 aged pensioners.

TABLE 2

LOW INCOME AGED PERSONS TAX OFFSET

LEVELS AND THRESHOLDS FOR 2000-2001

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

LOW INCOME AGED PERSON (d)

Single	2,230	20,000	37,840
Couple (each) (e) (f)	1,602	16,306	29,122
Couple separated because of illness (each) (e) (g)	2,040	18,882	35,202

FOOTNOTES

(a)	For 2000-2001 the tax offset level will be equivalent to the aged pensioner tax offset for a given level of taxable income.
(b)	The shade-out threshold is the maximum taxable income at which individuals will be entitled to the maximum tax offset level. The tax offset reduces by 12.5 cents of taxable income in excess of the shade-out threshold. The low income aged shade-out threshold also allows 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 low income aged persons tax offset.
(d)	The low income aged persons tax offset will be available to people at or above pension age (currently 61.5 years for women and 65 for men) who are considered to be residents for age pension purposes (ie individuals who have been residents in Australia for at least ten years).
(e)	Eligibility for the low income aged persons tax offset is also determined on the basis of a couples combined income, that is, the couples income must be below $58,244 where not separated because of illness and below $70,404 where separated because of illness. However each partners tax offset entitlement will be determined on the basis of individual taxable income (as is the case with aged pensioners).
(f)	In the case of a partnered low income aged person, any unused portion of the tax offset is transferable to his or her partner. This is the same calculation as that used for the below aged pensioner tax offset. Taxation Ruling TR 93/31 explains how to calculate the unused portion of the below aged pensioner tax offset to be transferred to the other partner, and the adjusted tax offset and adjusted tax offset threshold for the partner to whom any unused pensioner tax offset has been transferred.
(g)	Aged pensioner couples separated because of illness receive the (higher) single rate of pension payment but have the same income test free area as other aged pensioner couples. Therefore, the tax offset level for low income aged couples in this category is higher than the level for couples not separated because of illness but lower than that for a single low income aged person.