Wondering What a Tax Offset Is? Here’s Everything You Need to Know

The announcement of the 2022 Federal Budget brought a long list of interesting updates for Australians. From first homeowners to women, there were loads of promises made that caught the attention of Aussies all over, but perhaps one of the biggest Budget updates to get the attention of the public was the news of a promised cost of living payment and $420 tax offset from the Coalition. However, with the attention that this update got, there was one key question that seemed to emerge: what is a tax offset?

If you too are wondering what this is and how it works for you and your cash, allow us to assist somewhat. We’ve consulted the best resource for tax-related questions, the Australian Taxation Office (ATO). Here’s a guide.

What is a tax offset?

In essence, a tax offset is used to reduce the amount of tax you pay annually. However, this means of reducing your tax is different to making work-related expense deductions. The definition for tax offset, as listed on the ATO website, reads as follows:

Tax offsets (sometimes referred to as rebates) directly reduce the amount of tax payable on your taxable income.

In general, offsets can reduce your tax payable to zero, but on their own they can’t get you a refund.

What kinds of offsets are there?

Presently listed on the ATO website, there are nine different forms of offset you may be eligible for in Australia. From private health insurance rebates to options for low and middle-class earners as well as pensioners and seniors, there are a few different possible government offerings that may be able to help reduce the amount of tax you are required to pay.

The full list of options is available here to review.

If you’re unsure which are applicable to you and your situation, it’s always best to seek out the advice of an accountant who can point you in the right direction.

The one-off $420 cost of living offset promised in the Coalition’s 2022 Federal Budget is intended to be combined with the existing low and middle-income tax offset (LMITO) for the 21-2022 tax season.