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How does SAPTO work? (Senior Australians and Pensioners Tax Offset)

How does SAPTO work? (Senior Australians and Pensioners Tax Offset)

The Senior Australians and Pensioners Tax Offset (SAPTO) won’t shower you in riches. But depending on your age, relationship status and income, it could provide a handy tax offset of up to $2,230 for singles and up to $3,204 for couples.

Before you get too excited, a heads up. The devil is in the detail and some retirees may feel short-changed.

What is a tax offset?

A tax offset can reduce the amount of income tax you pay, but it doesn’t mean you get a refund of any offset amount remaining once your tax bill is reduced to zero. You’ll also still need to pay the Medicare levy if you’re not eligible for an exemption or reduction.

The Australian Taxation Office (ATO) assesses your eligibility when you submit your tax return.

Who is eligible for SAPTO?

There are two eligibility requirements for SAPTO:

1. You must be eligible to receive the Age Pension or Department of Veterans’ Affairs (DVA) Pension.

The Age Pension age in Australia depends on your date of birth. From 1 July 2023 the minimum age increased to 67 for anyone born after 31 December 1956. The minimum age for the DVA pension is 60.

2. You (and your partner) must pass a rebate income threshold test to determine whether you’re entitled to a full or partial offset.

Your rebate income is the total of the following items:

  • Your taxable income (if any). Your taxable income is your assessable income less any deductions that you’re eligible to claim.
  • Your reportable employer super contributions (if any). Reportable employer super contributions are any contributions that your employer makes on your behalf that are above the compulsory Superannuation Guarantee (currently 11% of salary or wages).
  • Your deductible personal super contributions (if any). Deductible personal super contributions are any that you have voluntarily made to a super fund and claimed as a tax deduction on your tax return.
  • Your net financial investment loss (if any). This includes any loss you may have made from investing in assets like shares or managed funds.
  • Your net rental property loss (if any). A net rental property loss occurs when your expenses associated with the property exceed the rental income it generates. This is known as negative gearing.
  • Your fringe benefits (if any). Fringe benefits include any benefits that your employer provides as part of your salary package, such as a company car for private use, or the reimbursement of personal expenses.

Note: The rebate income threshold doesn’t include any income you may be receiving from super. That’s because income from super is generally tax free if you’re aged over 60.

What are the SAPTO thresholds for singles?

If you’re single, your total rebate income must be less than $34,919 for the 2024-25 financial year to be eligible for the maximum SAPTO of $2,230. This is known as the Shade out threshold.

The SAPTO progressively reduces by 12.5 cents for every dollar over this amount, up to a rebate income level of $52,759 (where the offset cuts off completely). This is known as the Cut out threshold.

The SAPTO at various individual rebate income levels is for 2024-25 shown in the table below.

Single rebate incomeTax offset
Less than $34,919$2,230.00
$36,000$2,094.88
$38,000$1,844.88
$40,000$1,594.88
$42,000$1,344.88
$44,000$1,094.88
$46,000$844.88
$48,000$594.88
$50,000$344.88
$52,000$94.88
$52,759$0.00

In 2023-24 the shade out threshold was $32,279, and the cut-out threshold was $50,119. The SAPTO at various individual rebate income levels for 2023-24 is shown in the table below.

Single rebate incomeTax offset
Less than $34,919$2,230.00
$34,000$2,014.88
$36,000$1,764.88
$38,000$1,514.88
$40,000$1,264.88
$42,000$1,014.88
$44,000$764.88
$46,000$514.88
$48,000$264.88
$50,000$14.88
$50,119$0

Source: Estimates interpreted by SuperGuide according to information published by the ATO.

Note: These figures are current as at July 2024.

Try our income tax calculator to understand the offsets and levies that may apply to you, plus your effective tax rate.

Example

Lisa is 66 and still works part time. Her rebate income is $36,000, calculated as follows:

Taxable income: $31,000

plus

Deductible personal super contributions: $5,000

She has no reportable employer super contributions (i.e. amounts above the compulsory super guarantee) to add for rebate income calculation purposes, nor does she receive any fringe benefits.

She also doesn’t have any investment or rental property losses to deduct from her rebate income calculation.

Lisa has a rebate income of $36,000, so she’s entitled to an estimated SAPTO offset of $2,094.88.

Can you apply the Low Income Tax Offset (LITO) and SAPTO at the same time?

Yes, the Low Income Tax Offset (LITO) can be applied by the ATO in conjunction with SAPTO. You’re entitled to a LITO of $700 if your taxable income is less than $37,500. LITO reduces by 5 cents for each dollar of taxable income above $37,500 and reduces a further 1.5 cents for every dollar above $45,000, before it cuts out completely when your taxable income reaches $66,667.

Example

Continuing with the example of Lisa, her income level entitles her to the maximum LITO of $700, in addition to her SAPTO of $2,094.88.

What are the SAPTO thresholds for couples living together?

If you have a spouse and you’re living together, your combined rebate income is tested to determine your SAPTO eligibility. This combined income must be less than $61,988 for you to receive the maximum combined spousal SAPTO of $3,204 ($1,602 each).

The spousal SAPTO progressively reduces by 12.5 cents for every dollar of combined rebate income levels higher than this amount, up to $87,620 (where the offset cuts off completely).

The SAPTO for couples living together at various combined rebate income levels is shown in the table below:

Combined rebate incomeMaximum tax offset
$61,988$3,204.00
$64,000$2,952.50
$66,000$2,702.50
$68,000$2,452.50
$70,000$2,202.50
$72,000$1,952.50
$74,000$1,702.50
$76,000$1,452.50
$78,000$1,202.50
$80,000$952.50
$82,000$702.50
$84,000$452.50
$86,000$202.50
$87,620$0.00

In 2023-24 the shade out threshold was $57,948, and the cut-out threshold was $83,580. The SAPTO at various individual rebate income levels for 2023-24 is shown in the table below.

Combined rebate incomeMaximum tax offset
Less than $57,948$3,204
$60,000$2,948
$62,000$2,698
$64,000$2,448
$66,000$2,198
$68,000$1,948
$70,000$1,698
$72,000$1,448
$74,000$1,198
$76,000$948
$78,000$698
$80,000$448
$82,000$198
$83,580$0

Source: Estimates interpreted by SuperGuide according to information published by the ATO.

Note: These figures are current as at July 2024.

Example

Dan and Kate are married and both on the Age Pension. Their combined rebate income is $74,000. They are eligible for a SAPTO of $851.25 each ($1,702.50 combined).

What if you’re a couple and only one of you is eligible for SAPTO?

If you’re eligible for SAPTO and your spouse is not, the ATO still considers your combined rebate income as a couple to determine your eligibility in the first instance.

If you’re below the maximum combined rebate income threshold, you could still be entitled to the SAPTO.

However, the amount of offset you are entitled to will be calculated on your rebate income alone.

This two-step eligibility process leads to some perverse outcomes, which are best illustrated with an example.

Example

John and Jenny are married and live together in retirement. John is 67 and Jenny is 62. John has reached Age Pension age, but Jenny hasn’t. John is potentially eligible for SAPTO if his and Jenny’s combined rebate income is lower than the maximum SAPTO threshold.

Their combined rebate income is $64,000, which is below the $87,620 combined income threshold for couples.

As John’s actual rebate income was $32,000, which is below the cut-off individual threshold of $43,810 (half the couples combined threshold of $87,620), he is eligible to receive SAPTO of $1,476.25.

Jenny is not entitled to the SAPTO because she hasn’t reached Age Pension age.

But what if John’s actual rebate income was $44,000 and Jenny’s was $18,000? They still have combined rebate income of $62,000 but, in this instance, John would not be eligible for any SAPTO because his actual rebate income is above the $43,810 cut-off.

Jenny is still not entitled to SAPTO because she is below Age Pension age.

What’s more, if John was single with rebate income of $44,000, he would receive SAPTO of $1,094.88.

Confusing? Yes. Inequitable? Perhaps. It means couples may have the same combined income, but only some will receive any SAPTO depending on the individual contributions to their combined income.

To see more worked examples of how SAPTO is calculated, go to the ATO Seniors and Pensioners Tax Offset page.

To work out your potential eligibility for SAPTO, go to the ATO’s Beneficiary tax offset and seniors and pensioners tax offset calculator

Can you transfer any unused SAPTO amounts between you and your spouse?

It’s important to remember that tax offsets (like SAPTO) can only be used to offset tax you owe; they can’t give you a refund from the ATO.

That means it’s possible for a person to not use all their SAPTO. In this situation you can transfer your excess SAPTO to your spouse, provided they’re eligible to receive it.

This is best illustrated with another example.

Example

Paul and Joanne are married and live together in retirement. They’re both 68 years old. Their combined rebate income is $48,000 making them potentially both eligible for the maximum SAPTO of $1,602 each ($3,204 in total).

However, Joanne has no taxable income and pays no tax, so she can’t use her SAPTO to reduce or eliminate tax.

But Paul does have taxable income. Joanne can transfer her SAPTO of $1,602 to Paul to help him reduce his tax payable.

This transfer would be done automatically by the ATO when assessing Paul and Joanne’s tax returns.

If Joanne had a taxable income greater than $6,000 (rather than no taxable income) and didn’t use all her SAPTO, the amount she would be eligible to transfer to Paul would be automatically calculated by the ATO using the following formula:

Joanne’s SAPTO rebate amount minus ((her taxable income minus $6,000) x 0.15)

Again, this is best illustrated using an example.

Suppose Joanne had a taxable income of $15,000 (rather than none). The ATO formula would be applied as follows:

$1,602 – ((15,000 – $6,000) x 0.15)

= $1,602 – $1,350

= $252

Therefore $252 is the available SAPTO that Joanne could transfer to Paul.

This is a simplified example for illustrative purposes only. The actual combined SAPTO amount Paul receives will depend on a complex calculation using his rebate income, taxable income and the amount of LITO he is entitled to.

For a more detailed calculation see the ATO Transferring the seniors and pensioners tax offset.

What are the SAPTO thresholds for couples separated due to illness?

If you and your spouse are separated due to illness, the offset amount you’re entitled to and the minimum and maximum rebate income thresholds are all higher to reflect that your combined living expenses are likely to be higher.

Your combined rebate income must be less than $67,464 for you to receive the maximum combined spousal SAPTO of $4,080 ($2,040 each).

The spousal SAPTO progressively reduces by 12.5 cents in the dollar for combined rebate income levels higher than this amount, up to $100,104 (where the offset cuts off completely).

The SAPTO for couples separated due to illness at various combined rebate income levels is shown in the table below.

Combined rebate incomeMaximum tax offset
$67,464$4,080.00
$64,000$4,513.00
$66,000$4,263.00
$68,000$4,013.00
$70,000$3,763.00
$72,000$3,513.00
$74,000$3,263.00
$76,000$3,013.00
$78,000$2,763.00
$80,000$2,513.00
$82,000$2,263.00
$84,000$2,013.00
$86,000$1,763.00
$88,000$1,513.00
$90,000$1,263.00
$92,000$1,013.00
$94,000$763.00
$96,000$513.00
$98,000$263.00
$100,000$13.00
$100,104$0.00

In 2023-24 the shade out threshold was $62,558, and the cut-out threshold was $95,198. The SAPTO at various individual rebate income levels for 2023-24 is shown in the table below.

Combined rebate incomeMaximum tax offset
Less than $62,558$4,080
$64,000$3,900
$66,000$3,650
$68,000$3,400
$70,000$3,150
$72,000$2,900
$74,000$2,650
$76,000$2,400
$78,000$2,150
$80,000$1,900
$82,000$1,650
$84,000$1,400
$86,000$1,150
$88,000$900
$90,000$650
$92,000$400
$94,000$150
$95,198$0

Source: Estimates interpreted by SuperGuide according to information published by the ATO.

Note: These figures are current as at July 2024.

Example

Tom and Ann are married and both on the Age Pension. However, they’re not living together because Tom requires ongoing medical care in a nursing home. Their combined rebate income is $68,000. They are eligible for a SAPTO of $2,006.50 each ($4,013 in total).

If Tom has no taxable income, he may be able to transfer some of his SAPTO to Ann. Once again, for a more detailed calculation see the ATO Transferring the seniors and pensioners tax offset.

The bottom line

The ATO guidelines around SAPTO are complex and, for some couples, confusing and potentially unfair.

Whatever your circumstances, we suggest you go to the ATO’s Beneficiary tax offset and seniors and pensioners tax offset calculator to work out how much SAPTO you might be eligible for.

Disclaimer: The contents of this article are for the purposes of providing general information only. You should seek appropriate advice from a tax adviser, accountant or financial adviser before making any investments or implementing strategies involving your tax or superannuation interests.

About the author

Barbara Drury

Barbara is a financial journalist and author with over 30 years’ experience in Australia and the UK. She is a contributor to The Sydney Morning Herald and The Age Money section, and has worked for the Australian Financial Review and The Australian.

Barbara is the author of Alan Kohler’s Eureka Report Guide to Personal Investing, Sorting Out Your Finances for Dummies and Personal Finance for Dummies and co-author of Investing for Dummies with James Kirby.

Learn more about income tax rates and thresholds in the following guides:

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