Age Pension is taxable – do you need to lodge a return?

With the end of the financial year here, it’s time to start preparing your tax return. But do you need to complete a tax return if you receive an Age Pension?

The Age Pension is listed by Services Australia as a taxable payment, so yes, you may owe some tax at the end of the year if you receive pension payments and have other forms of income.

However, if the Age Pension is your sole source of income, then you don’t have to pay tax or even lodge a return.

Tax becomes more of a concern if you have other sources of taxable income besides the Age Pension, such as dividends, interest from shares, managed funds, rental income and other non-super investments.

Read: A guide to unusual deductions the tax office will approve

If you are liable to pay tax, you may be eligible for the seniors and pensioners tax offset (SAPTO).

To be eligible for the SAPTO, your ‘rebate income’ must be less than $50,119 for singles, and $83,580 for couples ($41,790 each) for the financial year. Rebate income is defined as the total amount of your taxable income plus any reportable super contributions, fringe benefit totals and net losses on investments.

The offset amounts to $2230 for singles, $1602 for each member of a couple ($3204 total) or $2040 for each member of a couple who are separated by illness. Your eligibility for the SAPTO is assessed when you lodge your return.

Read: How to claim tax deductions for personal super contributions

If you’re unsure whether you’d qualify for the SAPTO, the Australian Taxation Office (ATO) has a handy eligibility calculator you can use.

If you’re aged 60 or over, you can receive a full Age Pension and also receive payments from your super fund account-based pension and still qualify for the SAPTO. Account-based pension payments from your super attract no tax if you’re 60 and above.

In general, Centrelink does not withhold tax from Age Pension payments unless it has been specifically requested to, so some pensioners may be liable to pay tax at the need of the financial year.

If you know in advance that you’ll need to pay tax on your pension payments, you can make a request for tax to be withheld when you initially make your claim. Otherwise, you can request it through online portal myGov or at a Centrelink branch.

Read: Aussies’ tax burden among highest in developed world

Services Australia general manager Hank Jongen has shared the following tax-time advice for people receiving Centrelink payments.

“My first tip, and if you can afford to do this it is an important one, is to wait until late July because … all of your Centrelink information will be pre-filled into MyTax along with all the other information (such as) bank account interest and any employment details,” he said.

“What that means is you simply need to check the information, make sure it’s correct and it eliminates the risk of mistakes. But we understand not everyone can wait until late July in order to do that and may need to access their money sooner. If you’re in that situation, you can request a payment summary from us early in July.

“You do that online through your Centrelink account or go to our website. That payment summary will provide a statement of the payments you’ve received but that means you’ve got to manually transfer them over which of course increases the risk (of error).”

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Disclaimer: All content on YourLifeChoices website is of a general nature and has been
prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

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