Taking Advantage of Tax Offsets

Taking advantage of tax offsets could reduce the amount of tax you have to pay this financial year.<--break->

As a general rule tax offsets can only reduce the amount of tax you pay (excluding Medicare levy) to zero and you are not refunded any excess.

With a tax offset the ATO works out the tax due on your taxable income then reduces it by the total amount of your tax offsets.

Changes to income tests from 2009-10

From 1 July 2009, the ATO will apply new income tests and amend other existing tests to work out if you are entitled to claim certain offsets. For further information regarding these income tests and how they apply to tax offsets go to www.ato.gov.au/incometests

Education tax refund

Eligible parents, carers, legal guardians and independent students can get 50 per cent back (up to the maximum refund amounts) on some education expenses.

Eligible expenses include the cost of buying, establishing, repairing and maintaining any of the following items:

  • laptop computers and home computers
  • computer-related equipment such as printers, USB flash drives, as well as disability aids to assist in the use of computer equipment for students with special needs
  • computer repairs
  • home internet connections
  • computer software for educational use
  • school textbooks and other printed learning material, including prescribed textbooks, associated learning materials, study guides and stationery, and
  • prescribed trade tools for secondary school trade courses.

To find out more go to www.educationtaxrefund.gov.au or phone 13 28 61.

Entrepreneurs’ tax offset

The entrepreneurs’ tax offset (ETO) provides a 25 per cent tax offset for small businesses with annual turnover of less than $75,000. The tax offset begins to phase out if turnover is greater than $50,000 until it reaches zero at a turnover of $75,000.

A family income test will now apply by restricting eligibility for singles where their income for ETO purposes is more than $70,000 or $120,000 for families.

Net medical expenses

You can claim a tax offset of 20 cents in the dollar for your out-of-pocket medical expenses over $1,500. There is no upper limit on the amount you can claim.

Expenses you can claim include dental bills, optometry bills, prescribed medical aids, hearing aids, certain residential aged care accommodation and maintaining a properly trained guide dog.

Mature age worker tax offset

If you are 55 years or over on 30 June 2010 and still working you may be entitled to a tax offset of up to $500.
The offset is calculated for you by the ATO based on the information you provide in your tax return.

To be eligible for the offset, you must:

  • be an Australian resident for tax purposes
  • be aged 55 years or over on 30 June 2010
  • have received ‘net income from working’ of less than $63,000.
  • You will receive the full offset amount of $500 if you received net income from working between $10,000 and $53,000.

A reduced offset amount applies for net income amounts over $53,000 or less than $10,000.

Dependent spouse tax offset

You may be eligible to claim a dependent spouse tax offset of up to $2,243 if you provided financial support for your spouse (de facto or married) throughout the year.
You will be eligible for the offset if all of the following apply:

  • your adjusted taxable income was $150,000 or less
  • your spouse’s adjusted taxable income for the year was less than $9,254

you met all of the following conditions:

  • you maintained your spouse
  • you and your spouse are Australian residents
  • neither you nor your spouse were eligible for family tax benefit Part B or were only eligible for it at a shared-care rate.

Senior Australians tax offset

The senior Australians tax offset allows eligible people to earn more income before they have to pay tax and the Medicare levy. If you are eligible you will pay less tax and in some cases may not have to lodge a tax return.

It is easy to get confused between this tax offset and the mature age worker tax offset but some people can claim both, so it is important to check if you are eligible.

The senior Australians and pensioner tax offset calculator on the ATO website can help you work out whether you are eligible and how much of the offset you can claim.

How to claim tax offsets

Tax offsets can be claimed in your tax return. The ATO works out some tax offsets for you based on the information you provide in your tax return.

More information

More information on these and other tax offsets is available on the ATO website www.ato.gov.au or by calling 13 28 61

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