Beneficiary Tax Offset: Eligibility, How to Claim and Calculator

Learn more about the beneficiary tax offset in Australia, including eligibility, how to claim and a helpful calculator.
Beneficiary Tax Offset: Eligibility, How to Claim and Calculator

The Australian Tax Office has put a specific tax rebate to offset beneficiary tax in a broader effort to provide income protection to lower-income individuals. So if you’re receiving government benefits as your sole source of income over an entire tax year, you may qualify. 

We’ve created a helpful guide to navigate the process of the beneficiary tax offset and help you identify if you’re eligible. 

What is the beneficiary tax offset? 

The beneficiary tax offset is a rebate that applies to certain kinds of taxable government benefits and allowances. The tax offset provides relief to those on government support by directly reducing the amount of tax they pay, which translates to more disposable income. 

The rebate formula works to shield government benefits from tax at lower income levels. This ensures that if the government payments are your only source of income in a tax year, you don’t have to pay tax. 

We’ve included some information below regarding how you claim and some handy resources to help you calculate your rebate.

Who is eligible? 

The beneficiary tax offset is available to taxpayers who receive certain Centrelink allowances and payments and commonwealth education allowances. Examples of eligible payments include Jobkeeper, Youth Allowance, Austudy, Farm household allowance and CDEP wages. Those on a regular pension are not eligible. 

How do you claim the tax offset?

Claiming the tax offset is automatic. The ATO uses your tax return data to generate the rebate amount; however, you need to enter the appropriate eligible income data in your tax return so the ATO can identify it and include it in your return.

You pay no tax for the year if:

  • You only receive the qualifying allowances and payments
  • You have no other taxable income

Is the beneficiary tax offset refundable?

The beneficiary tax offset is not refundable in the traditional sense, where you may receive a tax refund for deductions you claim at the end of the tax year. However, assuming you’ve filled out your tax return with the correct details, the rebate will apply, and you’ll pay less tax.  

Beneficiary Tax Offset Calculation

Before you can calculate your beneficiary tax offset, you’ll need to collect some important information, including:  

For those who have a De Facto partner or spouse, you’ll also need their taxable income, their total rebate income amount and any amount of net income from a trust where the trustee was liable to pay tax on disability because your spouse was under a legal disability. Common examples of a legal disability include: 

  • Someone bankrupt
  • Someone declared legally incapable because of a mental condition
  • Someone under the age of 18

There are a few exempt pensions. If you fall under one of these categories, you’ll require the total amount of your pension income for that tax year: 

  • Disability support pension and, if applicable, youth disability supplement
  • Wife pension
  • Carer pension
  • Invalidity service pension
  • Partner service pension 

After you’ve collected everything you need, the ATO provides an easy-to-use beneficiary tax offset calculator. Typically it takes 5 to 10 minutes to use this calculator.

Wrap Up 

The beneficiary tax offset is a great option for those who earn 100% of their income through government allowances. If you’re unsure if you’re eligible for the tax offset, we recommend contacting the ATO or discussing your options with a tax accountant. 

More helpful reading: 

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