What is a tax offset?
Wednesday, February 7th, 2007A tax offset is a reduction in tax allowed to a taxpayer to provide tax relief.
To qualify, a taxpayer is generally in the lower income bracket, but this is not always the case.
The offset reduces the tax owing, not the taxable income, and can only reduce the tax to zero. It will not result in a refund. But there are always exceptions to any rule, and this is no different.
The exceptions are:
- 30% private health insurance rebate. If you don’t claim it when you take out your private health, you can claim it at tax time.
- The franking credit. Any excess imputation credits paid on dividends is refunded.
- Excess baby bonus is refunded
- Landcare and water tax offset can be carried forward to reduce a future tax liability. This is one claim I have never come across in all my tax years.
Tax credits do not reduce the medicare levy or HELP/HECS debt in most cases.
Some tax offsets need to be calculated, others the ATO will calculate bases on the information you have entered on your tax return.
There are four groups of tax offsets.
Dependent tax offsets
- Spouse (no child or student)
- Child-housekeeper
- Housekeeper
- Parent or spouses parent
- Invalid relative
- baby bonus
- 30% child care rebate
Tax offset dependent on source and level of income
- Low income/beneficiary
- Pensioner
- Senior Australian
- Superannuation or annuity pension
- Franking offset
- Mature age worker
- Entrepeneurs tax offset
- Interest from land transport facilities tax offset scheme
Offsets for specifc expenditure
- Superannuation condtributions on behalf of spouse
- 30% private health insurance
- 20% on net medical expenses over $1500
- Landcare and water facility
- Heritage conservation work
Zone or overseas forces tax offset
- Members of armed forces stationed overseas or in remote areas
- If you live in a remote area
may be entitled to a zone offset.