Working longer reaps tax benefits for over-55s

Q: My parents are 70 years old and still working. Can they get the Mature Age Worker Tax Offset (MAWTO), and the Senior Australians Tax Offset (SATO)?

Trish’s response: The MAWTO and the SATO are subject to different tests, and individual eligibility will need to be confirmed with the ATO.

Subject to satisfying the eligibility tests, it is possible for working 70-year olds to receive the MAWTO and/or the SATO. Tax offsets, previously known as rebates, reduce the tax payable by an individual.

Although not strictly a superannuation question, I can provide you with the general rules applicable for each test and where you can go for some further information.

Mature Age Worker Tax Offset

The maximum MAWTO available is $500 each year, and the ATO automatically calculates this offset based on the information contained in an individual’s tax return. Note that this maximum offset has not been increased since it was introduced in July 2004.

According to the ATO, you must meet ALL of the conditions listed below to be eligible for the MAWTO:

• be an Australian resident for tax purposes
• be aged 55 years or more at the end of the income year
• have received ‘net income from working’ below the upper income threshold (for the 2010/2011 year the upper threshold is $TBC, and for the 2009/2010 year the upper threshold is $63,000).

You receive the full $500 offset if your ‘net income from working’ is below $TBC and more than $TBC for the 2010/2011 year, and below $53,000 and more than $10,000 for the 2009/2010 year.

Note: The offset reduces by 5 cents for every dollar of income above $TBC for the 2010/2011 year, and for every dollar of income above $53,000 for 2009/2010 year.

From the start of the 2009/2010 year, ‘net income from working’ includes reportable employer super contributions (such as salary sacrificed contributions but not Superannuation Guarantee contributions).

According to the ATO website, from the 2009/2010 income year, a person’s ‘net income from working’ includes:

• salary or wages
• allowances, earnings, tips and directors fees
• business and attributed personal services income
• net foreign employment income
• net amount of farm management deposits and withdrawals
• total reportable fringe benefits amounts
• reportable employer super contributions.

You need to confirm your eligibility for the MAWTO with the ATO. You can find more information about the MAWTO by clicking on this link.

Are you eligible for SATO?

The eligibility for the MAWTO is linked to income from working, while eligibility for the SATO is linked to all income.

If you have reached Age Pension age, that is 65 years for men and since January 2010, 64 years for women, and you satisfy residency requirements or equivalent conditions, then you’re eligible for the Senior Australians Tax Offset, subject to meeting the income test.

The income test for the SATO relates to ‘rebate income’. According to the ATO, rebate income includes a person’s:

• taxable income
• adjusted fringe benefits (reportable fringe benefits x 0.535)
• total net investment loss
• reportable super contributions.

Note that for the MAWTO, the income test only includes reportable employer super contributions, while for SATO eligibility, the income test includes all reportable contributions, which includes personal tax-deductible contributions. Also, I believe the residency test for the two offsets is slightly different.

I explain SATO in more detail in the following articles:

• SATO: Cutting seniors tax via super contributions no longer possible
• No tax in retirement because you SATO

Anyone considering taking advantage of the MAWTO or the SATO, should confirm eligibility with the Australian Tax Office, or with your accountant.

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