No tax in retirement because you SAPTO (updated rates)

This article is updated annually with new rates, or updated periodically to highlight changes (if any) to the Seniors & Pensioners Tax Offset (SAPTO) rules. This article includes SAPTO rates for the 2015/2016, 2014/2015, 2013/2014, and 2012/2013 years, and SATO rates for the 2011/2012, 2010/2011, 2009/2010 and 2008/2009 years. Before 1 July 2012, the SAPTO was called the Senior Australians Tax Offset (SATO). Latest article update was 2 January 2016.

The superannuation rules delivering tax-free super for over-60s are not the only tax benefits that you can take advantage of in retirement. You may also be eligible for the Seniors & Pensioners Tax Offset (SAPTO), assuming you have reached a certain age and your income is below a certain threshold (see Table 1 below).

Tax-free super for over-60s: If you are aged 60 or over, your superannuation benefit from a taxed source is not included as part of your assessable income. Most Australians receive super benefits from a taxed source, unless you’re a member of one of the older public sector super funds (untaxed source). If you super benefit is from an ‘untaxed source’ some tax is payable on the taxable component of the benefit.

Seniors & Pensioners Tax Offset (SAPTO): The SAPTO means that a couple who has reached Age Pension age, can earn a ‘rebate income’ of up to $28,974 each ($57,948 combined) for the 2015/2016 year without paying income tax, subject to certain conditions. This ‘rebate income’ is in addition to any super benefits from a taxed source. (This level of rebate income also applies for the 2014/2015 year, and the 2013/2014 and 2012/2013 years).

Tip: The combination of SAPTO, and tax-free super for over-60s, means that Australians of Age Pension age or over can enjoy even greater tax-free income.

The tax consequences of the superannuation rules are fantastic for those senior Australians eligible for the Seniors & Pensioners Tax Offset (SAPTO). Even for those Australians not eligible for the SAPTO, the tax rules in combination with the super rules, are still pretty enticing. The retirement tax rules are set out in the next section.

How do the super and tax rules operate in retirement?

  1. You can earn non-super income in addition to your tax-free super benefit and take advantage of the tax-free threshold of $18,200 (if under Age Pension age, or if over Age Pension age and not eligible for SAPTO) and the low income tax offset (LITO) of up to $445 (for the 2015/2016 year, or for the 2014/2015, 2013/2014, and 2012/2013 years). For the 2010/2011 year, the tax-free threshold for was $6,000 (if under Age Pension age, or if over Age Pension age but eligible for SATO) and the LITO was up to $1,500.
  2. Rewording point 1, if you’re under Age Pension age (or over Age Pension age and not eligible for SAPTO), you can earn non-super income of up to $20,542 for the 2015/2016 year (or for the 2014/2015, 2013/2014, or 2012/2013 years) before any income tax is payable. For the 2011/2012 year, you could earn up to $16,000 before any income tax was payable.
  3. The tax rules get even better when you reach the age of 65 (current Age Pension age). If you’re Age Pension age (currently age 65) or older, you may be able to access more generous tax-free thresholds, known as the Seniors and Pensioners Tax Offset (SAPTO). If you’re single, you can earn up to $32,279 in the 2015/2016 year (or for the 2015/2016, 2013/2014, or 2012/2013 years) in non-super income without paying a cent of tax because of the application of SAPTO and LITO.
  4. This $32,279 of ‘rebate income’ for the 2015/2016 year (and this level of rebate income also applies for the 2014/2015, 2013/2014, and 2012/2013 years), is in addition to any superannuation benefit that you receive from a taxed source (super benefits are tax-free when paid on or after the age of 60 from a taxed source).
  5. If you earn more than $32,279, or $28,974 each as a couple for the 2015/2016 year (and also for the 2014/2015, 2013/2014 and 2012/2013 years), you will still be able to access the SAPTO, but it will be a reduced tax offset. What this means is that some income tax will be payable if your ‘rebate income’ exceeds the lower income threshold of $32,279 (for a single person) or $28,974 each for a couple. 

How does the ATO calculate ‘rebate income’ for SAPTO?

The income test for SAPTO is based on income known as ‘rebate income’ which includes:

  • taxable income
  • reportable super contributions: these types of contributions include salary sacrifice contributions and personal deductible contributions.
  • total net investment loss (includes both net financial investment loss and net rental loss
  • adjusted fringe benefits (reportable fringe benefits x 0.535)

A couple who has reached Age Pension age, can earn a ‘rebate income’ of up to $28,974 each ($57,948 combined) for 2015/2016 year without paying income tax, subject to certain conditions (see Table 1 below). The rebate income thresholds are the same for the 2014/2015, 2013/2014 and 2012/2013 years (see Table 2 later in the article).

How are couples tested for SAPTO? A couple is first tested for SAPTO eligibility on combined income. If they have combined rebate income under the Shade-Out Threshold, then each member of a couple is tested separately for SAPTO eligibility. If a member of a couple earns more than the Shade-Out Income Threshold ($41,790 for the 2015/2016 year, and also for 2014/2015 year and for 2 earlier years), then that member of the couple is not eligible for SAPTO. If both members of a couple are eligible for SAPTO, and one member of the couple does not fully use the SAPTO (for example, you earn less than $28,974 for the 2015/2016 year or for the 2014/2015 year, or earlier years) then you may be able to transfer the unused portion to the other member of the couple.

If a couple’s income exceeds the cut-out income threshold of $83,580 for the 2015/2016 year (or for the 2014/2015 year, or 2 earlier years), the couple is no longer eligible for SAPTO. A couple is then treated like any other taxpayer and is taxed on taxable income less the $18,200 tax-free threshold (confirm your specific tax position with your accountant or the ATO).

Note: Again, this ‘rebate income’ is in addition to any super benefits from a taxed source. The combination of SATO and tax-free super for over-60s means that Australians of Age Pension age or over may secure even greater tax-free income.

Completing tax returns: Each year, the ATO publishes information on its website to assist taxpayers who are seeking to claim SAPTO, and to ensure taxpayers complete the income tax return correctly. 

Table 1: SAPTO thresholds for 2015/2016 year
CategoryFull Offset Income ThresholdShade-Out Income ThresholdMaximum Tax Offset Available
Single$32,279$50,119$2,230
Couple (each)*$28,974$41,790$1,602
Couple (combined)$57,948$83,580$3,204*
Couple (each, living apart due to illness)*$31,279$47,599$2,040
Couple (combined, living apart due to illness)$62,558$95,198$4,080*
*A couple is tested on combined income for SAPTO eligibility. If combined income is less than combined SAPTO threshold, then each member of a couple is tested separately for SATO eligibility, and also whether the unused portion (if any) of spouse’s SAPTO can be transferred.

Notes: Combined effect of the SAPTO and LITO is that, at maximum tax offset eligibility, no tax is payable. ‘Rebate income’ above the cut-out thresholds means no SAPTO is available, and a part offset is available for income between full offset and cut-out income threshold. The SAPTO reduces by 12.5 cents for each $1 of taxable income above the Full Offset Income Threshold up to the Cut-Out Income Threshold (officially known as the ‘Shade-out threshold’).

Medicare levy may still be payable

Medicare levy may still be payable even where income tax is not payable due to SAPTO. Note also that the income test measured for SAPTO is ‘rebate income’ (refer earlier in this article for explanation), while the income test for Medicare levy threshold is taxable income. Consider the following scenarios:

  • If you’re a senior or pensioner, you pay no Medicare levy when your taxable income is less than $33,044.
  • If a single person eligible for SAPTO has a rebate income of less than $32,279, then no tax is payable, and presumably no Medicare levy is payable (because presumably taxable income is below $33,044).
  • If a single person eligible for SAPTO has a rebate income of more than $32,279 then the person is required to pay some income tax. Assuming taxable income is less than $33,044, then no Medicare levy.
  • If a single person eligible for SAPTO has a rebate income of more than $32,279 then some tax is payable. If the same person has taxable income of more than $31,044 but less than $41,306, then the person is required to pay 10% of the excess taxable income above $31,044 as Medicare levy.
  • If a single person eligible for SAPTO has a taxable income (different definition to rebate income) of more than $41,306 then 2% Medicare levy is payable, along with some income tax. For the Medicare levy treatment of couples eligible for SAPTO see ATO website.

SAPTO income thresholds for earlier financial years

Individuals who have reached Age Pension age have considerable scope to take advantage of the SAPTO. The text below explains the cut-out income thresholds for SATO for the following earlier financial years:

SAPTO for 2014/2015, 2013/2014 and 2012/2013 years

A couple earning rebate income greater than $57,948 a year (for 2014/2015, 2013/2014 or for 2012/2013 years) is still eligible for the Seniors and Pensioners Tax Offset but they will receive a lower tax offset, which means that some tax is generally payable. SAPTO still applies to ‘rebate income’ of up to $50,119 for a single person and $83,580 ($41,790 each) for a couple (for the 2014/2015, 2013/2014 or 2012/2013 years), which means you still pay tax but not as much.

Note: If an individual’s or couple’s income exceeds the cut-out income threshold, they are no longer eligible for the Seniors and Pensioners Tax Offset. Such a taxpayer is then treated like any other taxpayer, and subject to ordinary income tax rates (for the latest marginal income tax rates see SuperGuide article Australian income tax rates for 2015/2016 and 2014/2015 years.

Table 2: SAPTO thresholds for 2014/2015, 2013/2014, or for 2012/2013 year
CategoryFull Offset Income ThresholdShade-Out Income ThresholdMaximum Tax Offset Available
Single$32,279$50,119$2,230
Couple (each)*$28,974$41,790$1,602
Couple (combined)$57,948$83,580$3,204*
Couple (each, living apart due to illness)*$31,279$47,599$2,040
Couple (combined, living apart due to illness)$62,558$95,198$4,080*
*A couple is tested on combined income for SAPTO eligibility. If combined income is less than combined SAPTO threshold, then each member of a couple is tested separately for SATO eligibility, and also whether the unused portion (if any) of spouse’s SAPTO can be transferred.

Notes: Combined effect of the SAPTO and LITO is that, at maximum tax offset eligibility, no tax is payable. ‘Rebate income’ above the cut-out thresholds means no SAPTO is available, and a part offset is available for income between full offset and cut-out income threshold. The SAPTO reduces by 12.5 cents for each $1 of taxable income above the Full Offset Income Threshold up to the Cut-Out Income Threshold (officially known as the ‘Shade-out threshold’).

Note: A couple is first tested for SAPTO eligibility on combined income. If they have combined rebate income under the Shade-Out Threshold, then each member of a couple is tested separately for SAPTO eligibility. If a member of a couple earns more than the Shade-Out Income Threshold ($41,790 for the 2014/2015, year, and for the 2013/2014 or 2012/2013 years), then that member of the couple is not eligible for SAPTO. If both members of a couple are eligible for SAPTO, and one member of the couple does not fully use the SAPTO (for example, you earn less than $28,974 for the 2014/2015 year or for the 2013/2014 year) then you may be able to transfer the unused portion to the other member of the couple.

If a couple’s income exceeds the cut-out income threshold of $83,580 (for the 2014/2015 year, or for the 2013/2014 or 2012/2013 years), the couple is no longer eligible for the offset. A couple is then treated like any other taxpayer and is taxed on taxable income less the $18,200 tax-free threshold (confirm your specific tax position with your accountant or the ATO).

SATO for 2011/2012 and 2010/2011 years

A couple earning rebate income greater than $53,360 a year (for 2011/2012 or for 2010/2011 years) were still eligible for the Senior Australians Tax Offset but they would receive a lower tax offset, which means that some tax would be generally payable. SATO still applied to ‘rebate income’ of up to $48,525 for a single person and $78,992 ($39,496 each) for a couple (for the 2011/2012 or 2010/2011 years), which meant you still paid tax but not as much.

Note: If an individual’s or couple’s income exceeded the cut-out income threshold, they are no longer eligible for the Senior Australians Tax Offset. Such a taxpayer is then treated like any other taxpayer, and subject to ordinary income tax rates (for the marginal income tax rates for these 2 financial years see the end of the SuperGuide article Australian income tax rates for 2015/2016 and 2014/2015 years.

SATO thresholds for 2011/2012 year, or for 2010/2011 year
CategoryFull Offset Income ThresholdCut-Out Income ThresholdMaximum Tax Offset Available
Single$30,685$48,525$2,230
Couple (each)*$26,680$39,496$1,602
Couple (combined)$53,360$78,992$3,204*
Couple (each, living apart due to illness)$29,600$45,920$2,040
*A couple is tested on combined income for SAPTO eligibility. If combined income is less than combined SAPTO threshold, then each member of a couple is tested separately for SATO eligibility, and also whether the unused portion (if any) of spouse’s SAPTO can be transferred.

Notes: Combined effect of the SATO and LITO is that, at maximum tax offset eligibility, no tax is payable. ‘Rebate income’ above the cut-out thresholds means no SATO is available, and a part offset is available for income between full offset and cut-out income threshold. The SATO reduces by 12.5 cents for each $1 of taxable income above the Full Offset Income Threshold (officially known as the ‘Shade-out threshold’).

Note: A couple is first tested for SAPTO eligibility on combined income. If they have combined rebate income under the Shade-Out Threshold, then each member of a couple is tested separately for SATO eligibility. If a member of a couple earnt more than the cut-out income threshold ($39,496 for the 2011/2012 or 2010/2011 year), then that member of the couple was not eligible for SATO. If both members of a couple were eligible for SATO, and they do not fully use the SATO (for example, you earnt less than $26,680 for the 2011/2012 year or for the 2010/2011 year) then you may have been able to transfer the unused portion to the other member of the couple.

If a couple’s income exceeded the cut-out income threshold of $78,992 (for the 2011/2012 or for the 2010/2011 year), they were no longer eligible for the offset. A couple is then treated like any other taxpayer and is taxed on taxable income less the $6,000 threshold (confirm your specific tax position with your accountant or the ATO).

SATO for 2009/2010 year

 

A couple earning rebate income greater than $51,360 a year (for 2009/2010) were still eligible for the Senior Australians Tax Offset but they would receive a lower tax offset, which meant that some tax would be generally payable. SATO applied to ‘rebate income’ of up to $47,707 for a single person and $76,992 ($38,496 each) for a couple (for the 2009/2010 year), which meant you still paid tax but not as much.

Note: If an individual’s or couple’s income exceeded the cut-out income threshold, they were no longer eligible for the Senior Australians Tax Offset. Such a taxpayer must then rely on the tax offsets, such as LITO, that apply to all eligible taxpayers.

SATO thresholds for 2009/2010 year
CategoryFull Offset Income ThresholdCut-Out Income ThresholdMaximum Tax Offset Available
Single$29,867$47,707$2,230
Couple (each)*$25,680$38,496$1,602
Couple (combined)$51,360$76,992$3,204*
Couple (each, living apart due to illness)$28,600$44,920$2,040
*A couple is tested on combined income for SAPTO eligibility. If combined income is less than combined SAPTO threshold, then each member of a couple is tested separately for SATO eligibility, and also whether the unused portion (if any) of spouse’s SAPTO can be transferred.

Notes: Combined effect of the SATO and LITO is that, at maximum tax offset eligibility, no tax is payable. ‘Rebate income’ above the cut-out thresholds means no SATO is available, and a part offset is available for income between full offset and cut-out income threshold. The SATO reduces by 12.5 cents for each $1 of taxable income above the Full Offset Income Threshold (officially known as the ‘Shade-out threshold’).

Note: Each member of a couple is tested separately for SATO eligibility. If a member of a couple earnt more than the cut-out income threshold ($38,496) for 2009/2010 year, then that member of the couple was not eligible for SATO. If both members of a couple were eligible for SATO, and one member of the couple does not fully use the SATO (for example, you earnt less than $25,680 for 2009/2010 year) then you may be able to transfer the unused portion to the other member of the couple.

If a couple’s income exceeded the cut-out income threshold of $76,992 (for 2009/2010 year), they were no longer eligible for the offset for that year. A couple was then treated like any other taxpayer and was taxed on taxable income less the $6,000 threshold (confirm your specific tax position with your accountant or the ATO).

SATO for 2008/2009 year

Note: Reportable super contributions are not counted as income for SATO eligibility for the 2008/2009 year.

SATO thresholds for 2008/2009 year
CategoryFull Offset Income ThresholdCut-Out Income ThresholdMaximum Tax Offset Available
Single$28,867$46,707$2,230
Couple (each)*$24,680$37,496$1,602
Couple (combined)$49,360$74,992$3,204*
Couple (each, living apart due to illness)$27,600$43,920$2,040
*A couple is tested on combined income for SAPTO eligibility. If combined income is less than combined SAPTO threshold, then each member of a couple is tested separately for SATO eligibility, and also whether the unused portion (if any) of spouse’s SAPTO can be transferred.

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Comments

  1. What is SAPTO?

    • Hi Joe
      SAPTO is explained in the article above, and we have set out the relevant text below:

      “Seniors & Pensioners Tax Offset (SAPTO): The SAPTO means that a couple who has reached Age Pension age, can earn a ‘rebate income’ of up to $28,974 each ($57,948 combined) for the 2015/2016 year without paying income tax, subject to certain conditions. This ‘rebate income’ is in addition to any super benefits from a taxed source.”

      Hope this helps.
      Cheers
      The SuperGuide Team

  2. Robert Burns says:

    Lots of useful information BUT the article totally misses the point that in order to receive SAPTO one must be in receipt of an old age pension (or part thereof) or other AustGov allowance.

    Thus self funded retirees do not receive SAPTO.

    See the test for T1 (seniors and pensioner’s tax offset) where one must be in one of the following categories:
    A- you receive old age pension (or part) and show taxable $ in income section I6.
    B->10yrs at age pension age + other conditions (eg aged >75yrs)
    C-veteran

  3. Mick Hunter says:

    I’m puzzled about the SAPTO Eligibility test for a person who is living with a spouse.

    From http://www.ato.gov.au/Rates/Household-Assistance-Package—tax-reforms/?default=&page=5
    SAPTO 2012 – 13
    The test effectively says:-
    If you had a spouse and the COMBINED rebate income of you and your spouse was less than
    $57,948, you are eligible for the full tax offset of $1602. Above this figure, the tax offset reduces linearly to zero at a COMBINED rebate income of $83,580.

    Also, the Individual tax return instructions 2013 for T2 talk only about COMBINED rebate income.

    However, in a note below your eligibility Table, you say:-
    Note: Each member of a couple is tested SEPARATELY for SAPTO eligibility. If a member of a couple earns more than the cut-out income threshold ($41,790 for the 2012/2013 or 2013/2014 year), then that member of the couple is not eligible for SAPTO

    So, is eligibility based on separate or combined rebate income?

  4. richard dobosz says:

    my question is that I will soon convert from acculation phase to pension phase in SMSF, all funds in shares a lot in dividend reinvestment, each year do I have to take the valve of dividends out of fund as cash ie 4% , if the dividends exceed 4% and I do not take them all out is this viewed as contribution and I need to open another acculation fund inside super fund. thank you for any comment . this the best super site going Richard

  5. Trish, many years ago my mother, who was an aged pensioner had to pay provisional tax on bank interest if it went above a certain amount which wasn’t high. She had no other earnings.

    The reason I’m asking this is because, apart from a fortnightly income stream from super I earn money from Term Deposits which is under the $32,279 threshold.

    Does payment of tax depend on how the money is earned?

    Thank you

  6. The (SATO) for a single over 65 in 2011/2012 is $30,685

    What is it for 2012/2013?

  7. Ruth Hooper says:

    Trish,
    Thanks for your website. It is invaluable to so many.

    Do you have the SATO thresholds for a couple in 2012/13 year or where can I obtain this information? The ATO website is a nightmare!

    • Trevor Andrews says:

      Apologies for jumping in, but I never had a reply to my similar question on this, so had to work it out for myself. Here’s a copy of the values from my spread sheet for the effective “with spouse” Tax Free Limits, which I’m hoping is correct. Agree the ATO site does not make it easy.
      2011-2012 2012-2013
      Lower Tax Limit $6,000.00 $18,200.00
      Lito Amount $1,500.00 $445.00
      Tax Rate 15.00% 19.00%
      Effective Tax Free
      Limit (non senior) $16,000.00 $20,542.11

      SATO/SAPTO $1,602.00 $1,602.00
      Amount

      Effective Tax Free
      Limit (senior) $26,680 $28,974

      The 2012/2013 figures tie in with this ATO website:
      http://www.ato.gov.au/individuals/content.aspx?menuid=0&doc=/content/00309813.htm&page=7#P179_6222

      The $1602 maximum tax offset has not changed for this year. Double the $28,974 and you get the $57,948 amount in the table on the ATO web site.

      Hope this helps.

  8. Hi Trish
    I am 55 years old and ticked the box to say I would retire from teaching at 55 years of age many years ago when I first started teaching. I am now divorced – the sole earner of a household of myself and 2 children 19 and 16years. I have 4.5 months of long service leave owing to me and a basic benefit of $50,000 payable. My superannuation pension will be approx. $1890 per fortnight for as long as I live. I am in the SSS scheme NSW. Am I best financially to retire in Jan 2013 and pay the tax on the lump sum for the long service leave and basic benefit or continue teaching until a new tax year and retire in July 2013? Please advise Many thanks Heather

  9. Trevor Andrews says:

    Once again Trish, thank you for your most informative web site, which I have used before as an easy to use reference on super matters. I have been trying to understand from this govt. web site:
    http://www.ato.gov.au/content/00309813.htm
    the effective new thresholds for SATO under the clean energy tax reforms. The current Full Offset
    Income threshold for SATO from your website for each person of a couple is $26,680 (for 2011-2012). $53,360 for a couple.
    But the ATO site above on the clean energy tax changes, indicates the new SAPTO “family threshold” will increase from $44,500 to $46,000.
    This seems like a decrease, and doesn’t seem to correlate. In fact few of the current thresholds given under SAPTO seem to tie in with the numbers in your 2011-2012 SATO table.
    I wonder if you can clarify SATO thresholds for 2012-2013?

    By the way, the estimator on the govt. clean energy site is next to useless. If you are a couple with one person of pension age, and the other not, it just tells you that Estimator does not handle this situation. How ridiculous!!

  10. If my public service allocated pension at retiring age 57 is $30 000 per year how much of this is taxed?

  11. Hi Elle
    Sorry for the delay in responding, and very sorry to hear about your situation. I’m hoping that the rise in the sharemarket since March 2009 (with the exception of a bumpy October 2009) has helped your situation. I’m not 100% certain of the question that you’re asking, but I’m guessing that you’re referring to the old rules ( no longer applicable) that required you to cash out your super monies, or start an income stream, at the age of 65 unless you satisfied a work test. This is no longer the case. An individual can keep savings in the super system indefinitely without starting an income stream, or wothdrawing a lump sum. If they do however, any earnings on those fund assets are subject to 15% earnings tax. Individuals can contribute to super up to the age of 74 (although anyone aged 65 to 74 must satisfy a work test), which gives those individuals able to work additional opportunity to boost super savings.
    The age 65 is relevant for those who want to continue working, because when you turn 65, you can access your super benefits without retiring or satisfying another condition of release. The Government has announced that it has no intention of extending the retirement age of 65 for the purposes of accessing super, although Age Pension age is increasing to age 67 over time.
    Note: If an individual has reached their preservation age (currently 55 but rising to age 60 depending on your birth date) and retired, then they can access super benefits. You can find out more by reading other articles on our SuperGuide website. If I have misunderstood your question, please let me know.
    Regards Trish

  12. My tax return shows that a married aged pensioner who’s wife is under aged pension but receiving partnet allowance does not receive the benifit of the wifes SATO benifit, and at the same time his SATO is reduced to $24680.00.
    It seems as though a married pensioner and a single pensioner paying tax at the single rate are assesed differently.
    If a married pensioner receives no benifit from his wife under SATO he should be taxed as a single person…this would raise his threshold to $29867.00…thank you

  13. I turned 60 june 2007 am retired, sold my large house down graded invested spare money into my super believing I would be making $25.000 per year till age 65 one month after I invested I lost $50.000 just like that.

    I would like to know what the chances of the government increasing the cut off for this Super Scheme from 65 to maybe 67 to give those of us that did this a chance to recover some of the money lost and make a little.

    Saying this I would like to remind that Government has already legislated that retirement age is going up gradually anyway.

    would love some feed back regarding this.

    • Can someone confirm my understanding of SATO. If I earn say &46k but my wife earns only $3K
      ie: $50K combined. We will as a couple pay no tax as we are below $78K allowed as a couple.
      Look forward to a response.

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