Tax Offsets and Rebates for Your 2026 Tax Return
This guide applies to the 2025-26 income year, being 1 July 2025 to 30 June 2026.
Tax offsets and rebates are different from deductions:
a deduction reduces your taxable income;
a tax offset directly reduces the tax calculated on your taxable income;
some offsets are non-refundable, meaning they can reduce your income tax to nil but cannot create a refund by themselves;
the private health insurance rebate may be received through reduced premiums or calculated through your tax return.
Your entitlement may depend on taxable income, spouse income, family circumstances, age, private health insurance details and other income-test amounts.
Low Income Tax Offset
The Low Income Tax Offset (LITO) is available to eligible Australian resident individuals with taxable income of up to A$66,667. The ATO calculates the offset automatically from your tax return.
FY2026 LITO table
Offset/Rebate | LITO calculation |
|---|---|
A$0–A$37,500 | Maximum A$700 |
A$37,501–A$45,000 | A$700 less 5 cents for each A$1 over A$37,500 |
A$45,001–A$66,667 | A$325 less 1.5 cents for each A$1 over A$45,000 |
A$66,668 or more | NIL |
LITO is non-refundable. It can reduce income tax payable to nil, but any unused amount is not paid as a separate refund.
Example - taxable income of A$40,000
Excess over A$37,500: A$40,000 − A$37,500 = A$2,500
Reduction: A$2,500 × 5% = A$125
LITO: A$700 − A$125 = A$575
The taxpayer’s FY2026 LITO is A$575, subject to their final tax return.
LMITO has ended
The Low and Middle Income Tax Offset (LMITO) does not apply to FY2026. It ceased after the 2021–22 income year.
Example: Offsets & Rebates
Scenario: Lisa qualifies for the following offsets:
Private Health Insurance Rebate: $300
SAPTO: $1,500
Offset | Amount |
|---|---|
Private Health Insurance Rebate | $300 |
SAPTO | $1,500 |
Total Offsets | $1,800 |
Scenario: John has a taxable income of $40,000.
Calculation:
Income over $37,500: $40,000 - $37,500 = $2,500
Reduction: $2,500 * 0.05 = $125
LITO: $700 - $125 = $575
Taxable Income | LITO |
|---|---|
$40,000 | $575 |
Senior Australians and Pensioners Tax Offset
The Senior Australians and Pensioners Tax Offset - SAPTO - may reduce the tax payable by eligible seniors, pensioners and some self-funded retirees.
Age alone does not automatically qualify a person for SAPTO.
The person must satisfy both:
the relevant Australian Government pension or veterans’ pension eligibility conditions; and
the applicable rebate-income test.
Rebate income is broader than taxable income and can include:
taxable income;
reportable employer super contributions;
deductible personal super contributions;
net financial investment losses;
net rental property losses; and
reportable fringe benefits.
FY2026 SAPTO thresholds
Circumstance | Maximum offset | Full offset where individual rebate income does not exceed | Offset cuts out at individual rebate income of |
|---|---|---|---|
Single, separated or widowed | A$2,230 | A$34,919 | A$52,759 |
Each member of a couple living together | A$1,602 | A$30,994 each | A$43,810 each |
Each member of an illness-separated couple | A$2,040 | A$33,732 each | A$50,052 each |
The offset reduces by 12.5 cents for each A$1 of individual rebate income above the relevant full-offset threshold.
For couples, combined rebate-income eligibility limits also apply:
Couple circumstances | Couple living together | |
|---|---|---|
Couple living together | A$87,620 | |
Couple living apart due to illness or nursing-home care | A$100,104 |
The final SAPTO amount depends on each spouse’s circumstances. In some cases, an unused SAPTO entitlement may be transferred between eligible spouses.
Private Health Insurance Rebate
The Australian Government Private Health Insurance Rebate helps eligible taxpayers meet the cost of qualifying private health insurance premiums.
Your rebate depends on:
income for surcharge purposes;
whether the single or family threshold applies;
the age of the oldest person covered by the policy;
eligible premiums paid;
the period of cover; and
the rebate already received through reduced premiums.
The rebate may apply to eligible hospital, general treatment - extras - and ambulance policies issued by an Australian registered health insurer.
It does not apply to the Lifetime Health Cover loading component of a premium.
FY2026 private health insurance income tiers
Tier | Single income for surcharge purposes | Family income for surcharge purposes | Medicare Levy Surcharge rate without appropriate hospital cover |
|---|---|---|---|
Base tier | A$101,000 or less | A$202,000 or less | 0% |
Tier 1 | A$101,001–A$118,000 | A$202,001–A$236,000 | 1% |
Tier 2 | A$118,001–A$158,000 | A$236,001–A$316,000 | 1.25% |
Tier 3 | A$158,001 or more | A$316,001 or mor | 1.50% |
The family threshold applies to couples, de facto couples and single parents.
For families with dependent children, the family threshold increases by A$1,500 for each dependent child after the first.
Income for surcharge purposes is not necessarily the same as taxable income. It may include reportable fringe benefits, reportable super contributions and total net investment losses.
Rebate Percentages - 1 July 2025 to 31 March 2026
Age of oldest person covered | Base tier | Tier 1 | Tier 2 | Tier 3 |
|---|---|---|---|---|
Under 65 | 24.288% | 16.192% | 8.095% | 0% |
65 - 69 | 28.337% | 20.240% | 12.143% | 0% |
70 or older | 32.385% | 24.288% | 16.192% | 0% |
Rebate percentages - 1 April 2026 to 30 June 2026
Age of oldest person covered | Base tier | Tier 1 | Tier 2 | Tier 3 |
|---|---|---|---|---|
Under 65 | 24.118% | 16.079% | 8.038% | 0% |
65-69 | 28.139% | 20.098% | 12.058% | 0% |
70 or older | 32.158% | 24.118% | 16.079% | 0% |
The rebate percentage changed from 1 April 2026, so two different percentages apply during FY2026.
Your insurer and the ATO generally perform the final calculation using the eligible premiums and dates of cover.
Private health insurance rebate versus Medicare Levy Surcharge
These are separate calculations.
Private health insurance rebate
The rebate helps meet the cost of eligible private health insurance. It can apply to eligible hospital and extras policies.
Medicare Levy Surcharge
The Medicare Levy Surcharge may apply where your income exceeds the relevant threshold and you, your spouse or your MLS dependants did not have appropriate private patient hospital cover.
Extras-only cover does not protect you from the Medicare Levy Surcharge.
The surcharge is calculated according to the number of days without appropriate hospital cover.
Incorrect rebate tier
If you claimed too much rebate through reduced insurance premiums, the excess may be recovered through your tax assessment.
If you claimed less rebate than you were entitled to, the difference may be credited through your tax return.
This is why we need accurate details of:
spouse or partner income;
dependent children;
policy holders;
persons covered;
start and end dates of hospital cover;
any period without appropriate hospital cover.
Other Common Tax Offsets
Small business income tax offset
Eligible sole traders and individuals receiving qualifying small business income from a partnership or trust may receive an offset of up to:
16% of the income tax attributable to eligible net small business income; and
a maximum of A$1,000.
The relevant small business must generally have aggregated turnover below A$5 million.
The ATO calculates the offset from the business information in the tax return
Spouse superannuation contribution tax offset
You may receive an offset of up to A$540 if you make an eligible after-tax super contribution for a low-income or non-working spouse.
Broadly:
Spouse’s relevant income | General result | |
|---|---|---|
A$37,000 or less | Potential maximum offset of A$540 | |
A$37,001 - A$39,999 | Offset progressively reduces | |
A$40,000 or more | No offset |
*Other contribution-cap and total-super-balance conditions apply.
Foreign income tax offset
If foreign income is taxable in Australia and foreign tax was correctly paid, a foreign income tax offset may be available.
Please provide:
gross foreign income;
foreign tax withheld or paid;
country of origin;
foreign tax statements;
Australian-dollar conversion details.
Where eligible foreign tax exceeds A$1,000, a separate foreign income tax offset limit calculation may be required.
Franking credits
Franking credits attached to Australian dividends are tax offsets.
Please provide all dividend statements showing:
franked dividends;
unfranked dividends;
franking credits; and
tax file number withholding.
Franking-credit entitlement remains subject to the holding-period and related-payment rules.
Proposed Future Private Health Insurance Change
The Government has proposed removing the higher age-based private health insurance rebate for people aged 65 and older from 1 April 2027.
Under the proposal, rebate percentages would be determined by income tier without the current higher age-based percentages.
As at 28 July 2026, this proposal is before Parliament and is not yet enacted.
It does not alter the FY2026 tables shown above.
What to Bring to Your Tax Appointment
Please provide, where relevant:
FY2026 private health insurance tax statement;
policy number and health insurer details;
exact hospital-cover start and end dates;
spouse or partner’s income details;
dependent children’s details;
pension or DVA payment information;
reportable fringe benefits;
reportable employer super contributions;
deductible personal super contributions;
net investment and rental losses;
spouse super contribution records;
foreign tax statements;
dividend statements.
Final Reminder
Tax offsets do not automatically produce a refund.
The final result depends on:
tax payable before offsets;
whether the offset is refundable or non-refundable;
income-test calculations;
spouse and dependant information;
the ordering rules for multiple offsets; and
whether all eligibility requirements are satisfied.
We will calculate the available offsets from your complete tax return information.