Senior Australians Tax Offset and ETP's

Is the taxpayer entitled to the senior Australians tax offset (SATO) under section 160AAAA of the Income Tax Assessment Act 1936 (ITAA 1936) where they received an eligible termination payment (ETP) which increased their taxable income above the cut-out threshold?

No. The taxpayer is not entitled to the SATO under section 160AAAA of the ITAA 1936 as their taxable income exceeds the cut-out threshold.

The taxpayer received an ETP during the year of income.

The ETP was made up of both a pre July 1983 component and a post June 1983 tax element.

The taxpayer's taxable income (including the ETP) exceeded the senior Australians tax offset threshold.

The taxpayer reached pension age within the meaning of the Social Security Act 1991 (SAA 1991) during the year of income.

The taxpayer has resided in Australia for more than 10 years and has not been in gaol.

The taxpayer is not entitled to any tax offsets for pensions, benefits or other payments under section 160AAA of the ITAA 1936.

Section 160AAAA of the ITAA 1936 allows eligible senior Australians to claim a SATO if they have on at least one day in the year of income: • reached pension age within the meaning of the SAA 1991; • has 10 years qualifying Australian residence or has a qualifying residence exemption for an age pension within the meaning of the SAA 1991; and • is not in gaol.

Subsection 160AAAA(3) of the ITAA 1936 requires the taxpayer to have a taxable income that is less than the cut-out threshold (determined under Regulation 150AB of the Income Tax Regulations 1936) and not be entitled to a tax offset under section 160AAA of the ITAA 1936 for certain pensions, benefits or other payments to be eligible for the SATO.

Section 6-10 of the Income Tax Assessment Act 1997 includes in assessable income amounts that are included by provisions about assessable income.

Subsection 27B(1) of the ITAA 1936 provides that assessable income includes the taxed element of the retained amount of a post-June 1983 component of an ETP. Section 27C of the ITAA 1936 includes in assessable income 5% of the retained amount of a pre-June 1983 component of an ETP.

The combination of the taxpayer's: • post-June 1983 taxed element, • 5% of the pre-July 1983 component, and • other income and deductions, • results in a taxable income that exceeds the cut-out threshold for the SATO.

Accordingly, the taxpayer is not entitled to a SATO under section 160AAAA of the ITAA 1936.