Issue
Is the taxpayer entitled to the low income aged persons tax offset under section 160AAAA of the Income Tax Assessment Act 1936 (ITAA 1936) where half of the combined taxable incomes of the taxpayer and their spouse exceed the married cut-out threshold for the year of income?
Decision
No, the taxpayer is not entitled to the low income aged persons tax offset under section 160AAAA of the ITAA 1936 where half of the combined taxable incomes of the taxpayer and their spouse exceed the married cut-out threshold for the year of income.
Facts
The taxpayer is of pension age during the year of income.
The taxpayer has at least 10 years of qualifying Australian residence.
The taxpayer was not in gaol for the entire year of income.
The taxpayer is not entitled to a pensioner or beneficiary tax offset.
The combined taxable income of the taxpayer and their spouse when halved, exceeds the married couple cut-out threshold for the year of income.
Reasons for decision
A low income aged person with a taxable income below the pensioner tax offset threshold is entitled to a tax offset under section 160AAAA of the ITAA 1936.
Section 160AAAA of the ITAA 1936 provides that the tax offset is available to persons who: • are of age pension age for at least one day in the income year; • are not entitled to a pensioner or beneficiary tax offset; • has 10 years qualifying Australian residence or has a qualifying residence exemption for an age pension • are not in gaol for the entire income year; and • have a taxable income below the relevant pensioner tax offset cut-out threshold.
The pensioner tax offset thresholds are indexed annually and vary according to the taxpayer's marital status and whether spouses are separated because of illness or infirmity.
If the taxpayer has a spouse, half the couple's combined taxable incomes must be less than the married couple cut-out threshold. If one spouse does not have enough taxable income to use all of the tax offset, the unused part of the tax offset can be transferred to the other spouse (regulations 150AE and 150AF of the Income Tax Regulations 1936).
As the combined taxable incomes of the taxpayer and their spouse when halved, exceed the married couple cut-out threshold, the taxpayer is not entitled under section 160AAAA of the ITAA 1936 to the low income aged persons tax offset.