# Tax offsets in Australia

Source: https://calculatax.com/tax/tax-offsets/
Title: Tax Offsets in Australia: LITO, SAPTO, WATO & More
Last updated: 2026-11-07

Tax offsets in Australia reduce the tax you pay dollar for dollar, after income tax is worked out on taxable income. The main ones for 2026-27 are the low income tax offset (up to $700) and the Seniors and Pensioners Tax Offset. That's up to **$2,230** for singles, on the latest published table.

The ATO works out both of those when it assesses your return. They sit alongside the rates and levies that make up [income tax in Australia](https://calculatax.com/tax/).

| Offset | Maximum | Who can get it | Refundable |
|---|---|---|---|
| Low income tax offset (LITO) | $700 | Residents with taxable income under $66,667 | No |
| Seniors and Pensioners Tax Offset (SAPTO), single | $2,230 | Age Pension age (67) or eligible pensioners, rebate income under $52,759 | No |
| SAPTO, each partner of a couple | $1,602 | As above, combined rebate income under $87,620 | No |
| Working Australians Tax Offset (WATO) | $250 | Residents with net labour income above the tax-free threshold, from 2027-28 | No |
| Private health insurance rebate | 24.118% to 32.158% of premiums (base tier, by age) | Holders of complying private health cover | Yes |

*At a glance 2026-27. SAPTO figures are the 2025-26 table, the latest published. The 2026-27 table isn't out yet. Sources: ATO; Department of Health, Disability and Ageing.*

- [Low income tax offset (LITO)](https://calculatax.com/tax/low-income-tax-offset/): Your LITO at any income, and the tax left after it.
- [SAPTO calculator](https://calculatax.com/tax/sapto-calculator/): The seniors and pensioners tax offset for singles and couples.
- [Income tax calculator](https://calculatax.com/tax/income-tax-calculator/): See the low income tax offset applied to your full tax bill.

## An offset cuts tax dollar for dollar; a deduction cuts taxable income

A deduction lowers the income your tax is worked out on, so it saves tax only at your marginal rate. An offset comes off the tax itself, so each dollar saves a full dollar, as long as you have tax to absorb it.

Take a resident with $90,000 of taxable income in 2026-27, and compare $1,000 of extra deductions with a $1,000 offset.

| $90,000 taxable income | No change | $1,000 deduction | $1,000 offset |
|---|---|---|---|
| Taxable income | $90,000 | $89,000 | $90,000 |
| Income tax | $17,520 | $17,220 | $16,520 |
| Medicare levy | $1,800 | $1,780 | $1,800 |
| Total | $19,320 | $19,000 | $18,320 |
| Saving | n/a | $320 | $1,000 |

*2026-27 resident rates with the 2% Medicare levy. Source: ATO; Calculatax calculation.*

At this income the offset is worth 3.125 times the deduction. The deduction saves 30% income tax plus the 2% levy on $1,000. The [marginal tax rate calculator](https://calculatax.com/tax/marginal-tax-rate-calculator/) shows what a deduction is worth at other incomes.

## Low income tax offset (LITO)

LITO is $700 for taxable income up to $37,500. It falls by 5 cents per dollar to $325 at $45,000, then by 1.5 cents per dollar to nil at $66,667. You don't need to claim it: the ATO applies it after you lodge.

With the $18,200 threshold, LITO means a resident pays no income tax up to $22,866 in 2026-27. The [low income tax offset (LITO)](https://calculatax.com/tax/low-income-tax-offset/) calculator shows the amount at any income.

### Foreign residents and working holiday makers

LITO is for residents, so a foreign resident can't get it. Working holiday makers are taxed on their own scale from the first dollar, which the [working holiday maker tax calculator](https://calculatax.com/tax/working-holiday-maker-tax-calculator/) applies.

## Seniors and Pensioners Tax Offset (SAPTO)

SAPTO is for people of Age Pension age, 67 or older, and people on some other government payments, if they meet the income tests. A single person gets up to $2,230. It shades out by 12.5 cents for each dollar of rebate income above $34,919 and ends at $52,759.

Each partner of a couple gets up to $1,602, shading out from $30,994 to $43,810. Partners separated by illness get up to $2,040. The [SAPTO calculator](https://calculatax.com/tax/sapto-calculator/) works out the amount for singles and couples.

> **These are the 2025-26 figures, the latest published.** The 2026-27 table isn't out yet. SAPTO isn't indexed and no change has been announced, so they're expected to carry over.

## Working Australians Tax Offset from 2027-28

WATO is a new offset of up to $250 a year, starting in the 2027-28 income year. It became law under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026. It doesn't apply to 2026-27 returns.

It's for Australian residents whose net labour income is above the tax-free threshold. It's non-refundable and applies only if tax on net labour income is more than $250. Any unused amount can't be transferred or carried forward.

The bottom tax rate also falls to 14% on 1 July 2027, and the [tax cut calculator](https://calculatax.com/tax/tax-cuts/) compares the years.

## Private health insurance rebate

The private health insurance rebate is a government contribution towards complying private health cover. You can take it as a lower premium, or as a refundable tax offset when you lodge.

It's income-tested, using the same income tiers as the Medicare levy surcharge. Your [rebate rate from the ATO's income thresholds and rates table](https://www.ato.gov.au/individuals-and-families/medicare-and-private-health-insurance/private-health-insurance-rebate/income-thresholds-and-rates-for-the-private-health-insurance-rebate) depends on your tier and the age of the oldest person on the policy.

| Oldest person covered | Base tier | Tier 1 | Tier 2 | Tier 3 |
|---|---|---|---|---|
| Under 65 | 24.118% | 16.079% | 8.038% | 0% |
| 65 to 69 | 28.139% | 20.098% | 12.058% | 0% |
| 70 or over | 32.158% | 24.118% | 16.079% | 0% |
| Singles income | $105,000 or less | $105,001 to $123,000 | $123,001 to $164,000 | $164,001 or more |
| Families income | $210,000 or less | $210,001 to $246,000 | $246,001 to $328,000 | $328,001 or more |

*Current private health insurance rebate rates, with 2026-27 income tiers. Family thresholds rise by $1,500 for each dependent child after the first. Source: ATO.*

If the rebate you took during the year was too high or too low for your income, the difference is settled in your assessment.

### Proposed change from 1 April 2027

**Proposed. Only applies if the bill passes Parliament.** The government plans one set of rates for all ages from 1 April 2027. The Senate shelved the bill on 14 October 2026 and it was reintroduced the next day. It hadn't passed when we last checked, in November 2026. The [Department of Health's paper on modernising the private health insurance rebate](https://www.health.gov.au/sites/default/files/2026-07/phi-rebate-changes-modernising-the-private-health-insurance-rebate.pdf) sets out the proposed rates.

| Proposed from 1 April 2027 | Base tier | Tier 1 | Tier 2 | Tier 3 |
|---|---|---|---|---|
| All ages | 24.118% | 16.079% | 8.038% | 0% |

*Proposed. Only applies if the bill passes Parliament. Source: Department of Health, Disability and Ageing, July 2026.*

If it passes, under-65s stay on the same rates and anyone 65 or older drops to them. The department expects those affected to pay $252 a year more on average. The ATO says it'll make the rates from 1 April 2027 available in March 2027, so check back then.

## Less common offsets: zone, invalid carer, spouse super, foreign income

Several offsets apply to narrower groups, each with its own test and amount. These figures come from the ATO's 2025-26 return instructions, the latest published. The 2026-27 versions aren't out yet.

| Offset | Who it's for | Amount |
|---|---|---|
| Zone | Your usual home was in a specified remote area for 183 days or more in the year | Fixed amount of $338 (Zone A), $57 (Zone B) or $1,173 (special areas) |
| Overseas forces | Personnel who served in a specified overseas locality | Fixed amount of $338 |
| Invalid and invalid carer | You maintain a dependant who's an invalid or who cares for one | Up to $3,396 for a full year |
| Spouse super contributions | You contribute to a low-income spouse's super and can't deduct it | 18% of up to $3,000, so at most $540 |
| Foreign income | You paid foreign tax on income that's also taxed here | Generally the foreign tax paid, subject to a limit above $1,000 |

*2025-26 amounts, the latest published. Source: ATO return instructions.*

### Income limits for the invalid carer offset

You can't get it if your adjusted taxable income is more than $120,007, combined with your spouse's where that applies. It starts to reduce once the dependant's own adjusted taxable income reaches $286, and it's nil at $13,866.

## Refundable vs non-refundable offsets

Most of the offsets above are non-refundable. They can reduce your income tax to zero, but any amount left over is lost. LITO, SAPTO and WATO all work this way, and they don't reduce the Medicare levy.

A refundable offset is paid to you even when it's more than the tax you owe. The private health insurance rebate is the example on this page.

**A single senior on $30,000: offsets left unused**

| Step | Working | Amount |
|---|---|---|
| LITO |  | $700 |
| Full SAPTO |  | +$2,230 |
| **Offsets available** |  | **$2,930** |
| Income tax before offsets |  | −$1,770 |
| **Offset that can't be used** |  | **$1,160** |

*2026-27 resident rates with the latest published SAPTO table (2025-26). Source: ATO; Calculatax calculation.*

A partner in a couple may be able to transfer unused SAPTO to their spouse, but the ATO's formula leaves nothing to move at this income. There's no such transfer for LITO.

## Offset questions: rebates, refunds, deductibility, spouse super and foreign income

### What is a tax offset?

It's an amount subtracted directly from the tax you owe, unlike a deduction, which reduces taxable income. A $1,000 offset saves $1,000 of tax if you have that much to cover. At $90,000 in 2026-27, a $1,000 deduction saves only $320.

### How much tax rebate will I get?

Your refund is the tax withheld during the year minus your assessed tax after offsets. A resident earning $90,000 paid weekly has $372 withheld each week, or $19,344 a year. Assessed tax and levy come to $19,320, so the refund would be $24. Deductions and offsets increase it, and untaxed income reduces it.

### Are rebates tax deductible?

No. A rebate or offset comes straight off your tax, so there's nothing left to deduct. The two do different jobs: at $90,000 a $1,000 offset saves $1,000, and a $1,000 deduction saves $320.

### How do I claim my spouse super contribution tax offset?

You claim it in your own tax return for the year you made the contribution. You can't have deducted the contribution, and your spouse's income must be under $40,000. The offset is 18% of up to $3,000, a maximum of $540, and the $3,000 falls by $1 for each $1 of spouse income above $37,000.

### How is the foreign income tax offset calculated?

It's generally the foreign tax you paid on income that's also in your Australian taxable income. A claim of up to $1,000 can use the foreign tax paid as is, with no limit calculation. Above $1,000 you must work out the offset limit, which may reduce the claim. Unlike LITO, it can also reduce your Medicare levy.

*Estimates only, based on published rates for 2026-27. General information, not tax or financial advice.*

## Sources

- [ATO: Low income tax offset](https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/tax-offsets/low-income-tax-offset)
- [ATO: Seniors and pensioners tax offset](https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/tax-offsets/seniors-and-pensioners-tax-offset)
- [ATO: Working Australians tax offset](https://www.ato.gov.au/about-ato/new-legislation/in-detail/individuals/working-australians-tax-offset)
- [ATO: Income thresholds and rates for the private health insurance rebate](https://www.ato.gov.au/individuals-and-families/medicare-and-private-health-insurance/private-health-insurance-rebate/income-thresholds-and-rates-for-the-private-health-insurance-rebate)
- [Department of Health, Disability and Ageing: Modernising the Private Health Insurance Rebate](https://www.health.gov.au/sites/default/files/2026-07/phi-rebate-changes-modernising-the-private-health-insurance-rebate.pdf)