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Income tests for tax offsets

Income tests are used to work out a person’s eligibility for tax offsets and benefits which can reduce the amount of tax they have to pay.

The Australian Taxation Office considers various items from a person’s tax return when applying income tests. For example, a number of offsets, benefits and obligations are assessed using a family income threshold. Those who have a spouse should include the spouse’s income in the relevant section of their tax return.

Below are some of the tests used to assess a person’s entitlements:

Adjusted taxable income (ATI)
A person’s ATI affects their entitlement to any dependant tax offset. Generally, an adjusted taxable income includes:
Rebate income
The ATO determines whether a person is eligible for the seniors and pensioners tax offset by considering a person’s ‘rebate income’. Rebate income includes taxable income; adjusted fringe benefits amount; total net investment loss and reportable super contributions.

Income for Medicare levy surcharge purposes
The ATO uses a person’s income for surcharge purposes to work out if they have exceeded the Medicare levy surcharge threshold that applies to them to determine:
Super income tests
Reportable employer super contributions are included in the income tests for the spouse super contributions tax offset; government super co-contribution and deduction for personal super contributions.
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