I’m guessing the first question you have is ‘What Is SAPTO?’
SAPTO stands for Seniors and Pensioners Tax Offset. It’s available to eligible pensioners and seniors who reside here in Australia.
The offset is made up of the Senior Australian Tax Offset (SATO) and the Pensioner Tax Offset (PTO). These were combined back in the 2012-13 income year to form SAPTO.
How does SAPTO work?
A tax offset reduces the amount of tax you’ll have to pay on your taxable income. This means that, if you are a senior who qualifies for the SAPTO, you can earn more income but pay less tax.
SAPTO is applied at the end of the tax calculation, after you’ve used any deductions (like charitable donations) to lower your taxable income. It’s taken directly off the amount of tax you owe.
In some cases, the SAPTO may reduce your tax liability to zero, which is obviously a great result.
Sadly, even if your SAPTO entitlement is more than the tax you owe, you won’t get a credit for any amount you don’t use – and you can’t use the extra towards your 2% Medicare levy either.
So, unless you’re eligible for a Medicare exemption or reduction, you could still have to pay the Medicare levy even if the SAPTO means you don’t have to pay any income tax.
Who is eligible for SAPTO?
Your taxable income
The total of your assessable income minus any deductions you are eligible to claim.
Reportable employer super contributions
Any contributions made on your behalf by your employer in addition to the compulsory superannuation guarantee of 9.5% of your salary or wages.
Fringe benefits
Any benefits that your employer provides as part of your salary package, such as a company car for private use, or the reimbursement of expenses such as school fees or meals.
Deductible personal super contributions
Any voluntary contributions that you’ve made to a super fund which you’ve claimed a deduction for on your tax return.
Net financial investment loss
Any loss from investing in assets like shares or managed investment schemes.
Net rental property loss
Also referred to as ‘negative gearing’, you will end up with a net rental property loss if the expenses associated with your rental property exceeds the rental income you get from it.
The good news is that any income you receive from super funds is tax-free for recipients over 60, so this won’t be included in the rebate income threshold for determining SAPTO.
And there’s more good news: Using the Seniors and Pensioners Tax Offset does not disqualify you from using other offsets. You can use the SAPTO in conjunction with the LITO (Low Income Tax Offset), as long as you meet the requirements for both.
How much SAPTO can you claim?
It all comes down to how much you earn: your total rebate income will determine the amount of the offset, if any, for which you qualify.
The maximum offset you could claim is $2,230, for a rebate income of $32,279 or less for the financial year for singles, or $3,204 for couples whose combined income is less than $57,948.
The rebate decreases incrementally if you earn more than the base rebate income – and cuts off completely at $50,119 for singles and $83,580 combined for couples.
SAPTO for couples
- If only one of you qualifies for SAPTO, the Australian Taxation Office will use your combined rebate income to determine your offset entitlement.
- You are even permitted to transfer all or any unused portion of the SAPTO to your spouse, to reduce their tax liability.
- If your combined rebate income is below the maximum threshold, you will still qualify for the offset.
- The offset amount, as well as the minimum and maximum rebate income thresholds, are higher for couples living separately because of illness. This reflects the higher living expenses incurred by these couples.
The final word
SAPTO is a valuable benefit that helps to seniors with a low income to live more comfortably. If you qualify you can use the offset to cut the amount of tax you have to pay – which means you’ll end up with more money in your pocket.
SAPTO could even leave with you no tax to pay at all – but it will never generate a refund, and you’ll still have to pay the Medicare levy unless you qualify for an exemption. Don’t forget that the age requirement for SAPTO is linked to the Age Pension – which will both start to increase from 1 July 2019.
