Seniors and Pensioners Tax Offset (SAPTO) Explained

SAPTO eligibility: the two tests

You are eligible for SAPTO if you meet both conditions for the income year, and you were not in jail for the whole year.

1. The pension or allowance condition. You meet it if you received one of these: Age Pension, Carer Payment, Disability Support Pension (if you are age-pension age), Education Entry Payment, Parenting Payment (single), or from Veterans' Affairs an age service pension, income support supplement, Veteran Payment, invalidity service pension (if age-pension age) or partner service pension. You also meet it if you were age-pension age (67 from 2023–24) and eligible for the Age Pension but did not receive it, because you did not claim or because you failed the income or assets test, provided you also meet a residence condition such as 10 years' Australian residence with at least 5 continuous. Similar rules cover veterans who meet the veteran pension age test.

2. The income condition. Your rebate income, or for a couple half of your combined rebate income, must be below the cut-out threshold in the table below.

SAPTO amounts and thresholds for 2025–26

You get the maximum offset when your rebate income is at or below the shading-out threshold. Above it, the offset falls by 12.5 cents for each dollar until it reaches nil at the cut-out threshold.

What counts as rebate income

SAPTO is tested on "rebate income", not taxable income. It is your taxable income (ignoring any assessable first home super saver released amount) plus:

• Reportable super contributions: reportable employer contributions and deductible personal contributions.
• Total net investment loss: net financial investment and net rental property losses.
• Adjusted fringe benefits: reportable fringe benefits, with benefits from employers exempt from FBT under section 57A of the Fringe Benefits Tax Assessment Act 1986 counted at 53%.

Why deductions may not help

A deductible personal super contribution or a negatively geared rental loss reduces taxable income but is added back to rebate income, so it can lower your tax at your marginal rate without increasing your SAPTO.

Worked example: a single age pensioner

Margaret receives the Age Pension and has rebate income (all of it taxable) of $40,000 in 2025–26.

• SAPTO: $2,230 − ($40,000 − $34,919) × 12.5c = $1,595.
• Low income tax offset: $575.
• Tax on $40,000 at 2025–26 resident rates: $3,488. After both offsets: $1,318.
• Medicare levy: $0, because her income is below the SAPTO Medicare threshold of $44,268. Without SAPTO eligibility it would be $800.

Worked example: a couple living together

Vanh and Mai both receive the Age Pension. Their rebate incomes are $32,590 and $26,780, so half their combined rebate income is $29,685, below the $43,810 cut-out. Both are eligible. Mai is under the $30,994 shading-out threshold and gets the full $1,602. Vanh's offset is $1,602 − ($32,590 − $30,994) × 12.5c = $1,402.50, which the ATO rounds to $1,403.

If one partner cannot use all of their SAPTO because their own income is low, the ATO automatically transfers the unused part to the other partner when both returns are lodged. A spouse with taxable income of $6,000 or less can transfer their whole offset. Above that, the unused amount is their SAPTO less 15 cents for each dollar by which their taxable income plus exempt pension income exceeds $6,000. In the ATO's example, a spouse in an illness-separated couple with a $2,040 offset and $10,000 of taxable income can transfer $1,440.

How SAPTO works with LITO and the tax-free threshold

SAPTO and the low income tax offset (up to $700) stack on top of the $18,200 tax-free threshold. Both offsets are non-refundable: they can reduce your tax to zero but do not create a refund on their own. Tax already withheld is still refunded. On 2025–26 rates, a single SAPTO recipient pays no income tax until about $35,813 of taxable income, and each member of a couple until about $31,888. These are calculated on this page from the ATO's 2025–26 rates, LITO and SAPTO figures and assume rebate income equals taxable income.

The hidden high marginal rate in the SAPTO taper

Between the shading-out and cut-out thresholds, several tapers overlap. At $48,000 of income in 2025–26, a single SAPTO recipient faces the 30% tax rate, the low income tax offset taper of 1.5c, the SAPTO taper of 12.5c and the Medicare levy phase-in of 10c per dollar. Each extra $1,000 therefore costs about $540 in tax, an effective rate of 54%. Earning an extra $5,000 from that point leaves only $2,330 after tax. These figures are calculated from the ATO's 2025–26 rates and thresholds. They matter when you decide whether to take extra part-time work, draw a taxable super income stream, or realise a capital gain in a particular year, and they explain why tax can rise quickly once rebate income passes $34,919.

SAPTO and the Medicare levy

If you are entitled to at least $1 of SAPTO, you use the higher Medicare levy low-income thresholds. For 2025–26, a single person entitled to SAPTO pays no levy at or below $44,268; above that, the levy is phased in at 10 cents per dollar, against an upper threshold of $55,335. As the ATO notes, single SAPTO entitlement ends when rebate income reaches $52,759, so above that point the ordinary thresholds and the full 2% apply. For a family, the SAPTO thresholds are $61,623 and $77,028. A person who is eligible but whose SAPTO has tapered to nil cannot use these thresholds.

Do seniors need to lodge a tax return?

If you are eligible for SAPTO, the ATO says you must lodge a 2025–26 return if your rebate income (not including your spouse's) was more than $34,919 if single, $33,732 if one of you lived in a nursing home or you lived apart due to illness, or $30,994 if you lived with your spouse all year. You must also lodge if tax was withheld from any payment or another reason applies. If none does, lodge a non-lodgment advice. Self-funded retirees with franking credits can apply for a refund of franking credits without lodging a full return.