Income Tax Rebates for 1997-98: Pensioner Rebate, Low Income Ages Persons Rebate, and Beneficiary Rebate

I am announcing today the arrangements to apply for the 1997-98 income year for the pensioner rebate, the low income aged persons rebate, and the beneficiary rebate.

Pensioner Rebate

The pensioner rebate levels, and the associated thresholds at which they will begin to shade out and at which they will cut out, are set out in the attached Table 1. An explanation of the rebate levels and thresholds is provided in the footnotes to the table.

For 1997-98, the rebates will enable single pensioners to earn non-pension taxable income up to $100 per fortnight, and pensioner couples to earn combined non-pension taxable income up to $176 per fortnight, without paying income tax. These income levels are based on the pension income test free amounts.

The pensioner rebate is available to recipients of the following social security pensions: the Age Pension, the Disability Support Pension (taxpayer of Age Pension age), the Disability Wage Supplement (taxpayer of Age Pension age) absorbed by the Disability Support Pension (from 1 January 1998), the Wife Pension (taxpayer or spouse of Age Pension age), the Parenting Payment (single) (formerly the Sole Parent Pension), the Widow Pension (Class B), the Carer Payment formerly the Carer Pension (taxpayer or caree of Age Pension age), the Mature Age Allowance (where first received before 1 July 1996) and the Mature Age Partner Allowance. It is also available to recipients of taxable service pensions.

Low Income Aged Persons Rebate

The low income aged persons rebate is available to people at or above age pension age (currently 61 years for women and 65 for men) who are considered to be residents for age pension purposes (ie, individuals who have been resident in Australia for at least ten years) and who have taxable income below the pensioner rebate cut-out threshold.

The low income aged persons rebate ensures that a person who has taxable income up to the pensioner rebate shade-out threshold, and who is an eligible low income aged person, will not have a tax liability.

The rebate, which was one of the Governments election commitments, is fully operational from 1997-98. The rebate level will be equivalent to the pensioner rebate level for a given level of taxable income, so that a single self-funded retiree with an income of $11,700 or less and a partnered couple with an income of $19,760 or less will not have a tax liability.

Singles with incomes up to $21,780 and partnered couples with incomes up to $34, 096 will have a reduced tax liability. The rebate will shade out at a rate of 12.5 cents for each dollar of income above the shade-out threshold. The rebate levels, shade-out thresholds and cut-out thresholds applying for 1997-98 are set out in the attached Table 2.

Beneficiary Rebate

The beneficiary rebate is calculated to offset the tax liability on the amounts of beneficiary allowances actually paid during the year. The rebate ensures that persons wholly dependent on allowances have no tax liability. Under these arrangements, taxpayers do not have to choose a rebate code from TaxPack. Instead, they simply have to state the amount of allowance received during the year, and the rebate will be calculated by the Australian Taxation Office (ATO) on this basis. Consequently, beneficiary rebate levels and thresholds are not included in this press release.

The beneficiary rebate is available to persons receiving the following payments:

• social security allowances, that is, Newstart and Sickness Allowances, Special Benefit, Widow Allowance, Partner Allowance and additional Parenting Payment (Partnered) (formerly the additional Parenting Allowance), and the Mature Age Allowance (granted on or after 1 July 1996);
• payments of exceptional circumstances relief or restart income support (encompasses the former Drought Relief Payment), and farm household support paid as a grant of financial assistance; and
• specified Commonwealth education and training payments, that is, payments made under AUSTUDY, ABSTUDY (including the ABSTUDY Masters and Doctorate Award) and the Veterans Children Education Scheme, and payments made to participants in a Commonwealth labour market program such as Formal Training Allowance, Green Corps Training Allowance, the Youth Training Allowance, and the Textile, Clothing and Footwear Special Allowance.

Payments under the Assistance for Isolated Children Scheme on or after 1 July 1996 are exempt from income tax (previously such payments were taxable and rebatable).

Relationship of the Above Rebates to the Low Income Rebate

Pensioners, low income aged persons, or beneficiaries with some tax liabilities will be able to utilise the low income tax rebate, which is available to all taxpayers with taxable income less than $24,450 in addition to the pensioner rebate, the low income aged persons rebate and the beneficiary rebate. The maximum rebate is $150, reduced by four cents in every dollar by which the taxpayer's taxable income exceeds $20,700.

CANBERRA
25 March 1998

Contact Officers:
Ms Michelle Calder (Treasury)
Telephone: (02) 6263-2804

Mr Mark Sheaves (ATO)
Telephone: (02) 6216-1465

TABLE 1. Pensioner Rebate and Levels Thresholds for 1997-98

FOOTNOTES

1. The pensioner rebate levels are sufficient to ensure that single pensioners receiving the full-rate of pension for the full year (and non-pension taxable income of $2,600), and pensioner couples receiving the full-rate of pension (and non-pension taxable income of $4576 combined), will not be required to pay tax.
2. The shade-out threshold is the maximum taxable income at which the pensioner is entitled to the full rebate. The rebate reduces by 12.5 cents for each dollar of taxable income in excess of the shade-out threshold.
3. The cut-out threshold is the level of taxable income at which the rebate reduces to nil. At or above this level of taxable income there is no entitlement to a rebate.
4. The pensioner rebate is available to recipients of the following social security pensions: the Age Pension, the Disability Support Pension (taxpayer of Age Pension age), the Disability Wage Supplement (taxpayer of Age Pension age) absorbed by the Disability Support Pension (from 1 January 1998), the Wife Pension (taxpayer or spouse of Age Pension age), the Parenting Payment (single), formerly the Sole Parent Pension, the Widow Pension (Class B), the Carer Payment formerly the Carer Pension (taxpayer or caree of Age Pension age), the Mature Age Allowance (where received before 1 July 1996) and the Mature Age Partner Allowance. It is also available to recipients of the following service pensions: Age Service Pension, Invalidity Service Pension (taxpayer or spouse of Age Pension age), Partner Service Pension (taxpayer or spouse of Age Pension age) and Carer Service Pension (taxpayer or caree of Age Pension age). The rebate does not apply to pensions that are not taxable.
5. In the case of partnered pensioners, any unused portion of the rebate is transferable to his or her partner. Taxation Ruling TR 93/31 explains how to calculate the unused portion of pensioner rebate to be transferred to the other partner, and the adjusted rebate and adjusted rebate threshold for the partner to whom any unused pensioner rebate has been transferred.
6. Married pensioners whose spouse does not receive a social security or service pension and who began to receive the pension before 12 March 1992 are entitled to the rebate and threshold at the single rate. Persons in this category who began to receive the pension on or after 12 March 1992 are entitled to the rebate and threshold at the married rate.
7. Pensioner couples separated because of illness receive the (higher) single rate of payment but the same income test free area as other pensioner couples. Therefore the rebate level for this category is higher than the level for pensioner couples not separated because of illness but lower than that for single pensioners.

Table 2. Low Income Aged Persons Rebate Levels and Thresholds for 1997-98

FOOTNOTES

1. For 1997-98 the rebate level will be equivalent to the pensioner rebate level for a given level of taxable income.
2. The shade-out threshold is the maximum taxable income at which individuals will be entitled to the maximum rebate level. The rebate reduces by 12.5 cents of taxable income in excess of the shade-out threshold.
3. The cut-out threshold is the level of taxable income at which the rebate reduces to nil. At or above this level of taxable income there is no entitlement to a rebate.
4. The low income aged persons rebate will be available to people at or above age pension age (currently 61 years for women and 65 for men) who are considered to be residents for age pension purposes (ie, individuals who have been resident in Australia for at least ten years).
5. In the case of a partnered low income aged person, any unused portion of the rebate is transferable to his or her partner. This is the same calculation as that used for the pensioner rebate. Taxation Ruling 93/31 explains how to calculate the unused portion of the pensioner rebate to be transferred to the other partner, and the adjusted rebate and adjusted rebate threshold for the partner to whom any unused pensioner rebate has been transferred.
6. Eligibility for the low income aged persons rebate is determined on the basis of a couples combined income, that is, the couples income must be below $34,096 where not separated because of illness and below $41,922 where separated because of illness. However each partners rebate entitlement will be determined on the basis of individual taxable income (as is the case with pensioners).
7. Pensioner couples separated because of illness receive the (higher) single rate of pension payment but have the same income test free area as other pensioner couples. Therefore the rebate level for low income aged couples in this category is higher than the level for couples not separated because of illness but lower than that for a single low income aged person.