What you need to know about 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?
It’s the Australian Taxation Office (ATO) that determines who is eligible for the SAPTO.
In order to qualify you must first meet the age requirement for the Age Pension. If you qualify for the Age Pension but do not receive it, the SAPTO could still apply to you.
Currently the age requirement for the Age Pension is 65 years and 6 months. Although the pension age for women was previously lower than for men, it has progressively increased since the 1990s until, in 2013, it matched the male pension age.
On 1 July 2019 the pension age will increase to 66 years and it will continue to increase by six months every two years until 1 July 2023, when will be set at 67 years for everyone.
But age isn’t the only qualifying factor.
The Seniors and Pensioners Tax Offset will vary depending on your taxable income and marital status. In order to qualify for the SAPTO, you must pass a rebate income threshold test.
Rebate income is the balance of the following items:
- 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 LMITO (Low Middle 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.
Use our SAPTO calculator to find out how much you can expect.
The maximum offset you could claim is $2,230, if your total rebate income is less than $32,279 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.
On that note…
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.
If your combined rebate income is below the maximum threshold, you will still qualify for the offset. Yay.
You are even permitted to transfer all or any unused portion of the SAPTO to your spouse, to reduce their tax liability.
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.
SAPTO is a valuable benefit that helps 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.