Many Centrelink payments are assessable for income tax purposes and need to be included on your tax return – not all of them but that’s a post for another day. If you receive a taxable government payment you may be entitled to a tax offset called the beneficiary tax offset (BTO).
This offset kicks in once you’ve reached more than $6,000 of an assessable government payment in a financial year. It’s likely you will also receive the Low Income Tax Offset (yes, you can get both).
As I’ve stated before, most offsets can only reduce your tax liability. It will not reduce your medicare and it is not a cash refund but it will help to reduce any tax you might otherwise pay.
How do I ensure I receive this?
If you prepare your own tax, you must enter the payment you receive at the correct item on your tax return. You’ll notice there are separate income sections for putting in things like Salary & Wages, Government Allowances and Government Pensions. The Tax Office will calculate your offset for you based on this information so be sure it goes in the right place.
How much is it?
Most people will have taxable benefits under $30,000. This entitles them to a 15% offset for every dollar above $6,000 in eligible benefits. As an example, if I received just $15,000 in Newstart my Beneficiary Offset would be $1,350.
What payments and allowances qualify?
The following list shows the payments and allowances that qualify for the beneficiary tax offset:
- Parenting payment (partnered)
- Newstart allowance
- Youth allowance
- Mature age allowance
- Partner allowance
- Sickness allowance
- Special benefit
- Widow allowance
- Austudy payment
- Exceptional circumstances relief payment or farm help income support
- Interim income support payment
- Cyclone Larry or Cyclone Monica income support payment
- Education payment of any of the following and you were 16 years or older
- ABSTUDY living allowance
- payment under the Veterans’ Children Education Scheme
- payment under the Military Rehabilitation and Compensation Act Education and Training Scheme 2004 – shown as ‘MRCA Education Allowance’ on your PAYG payment summary – individual non-business
- Training for Employment Program allowance; New Enterprise Incentive Scheme allowance; textile, clothing and footwear special allowance; Green Corps training allowance; or other taxable Commonwealth education or training payments
- Income support component from a Community Development Employment Project (CDEP) – shown as ‘CDEP salary or wages’ on your PAYG payment summary – individual non-business
- CDEP scheme participant supplement
- Northern Territory CDEP transition payment
- Equine workers hardship wage supplement payment.
Article by Christie Lewis
Christie is Practice Manager at Alan Lewis Accountants . Besides accounting, her passion is for all things small business (and blogging, of course). You can contact Christie directly at christie@lewistaxation.com.au.
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