Income tax: transfer of pensioner rebate between partners

This Ruling explains: (a) when the unused portion of a partnered pensioner's rebate may be transferred to the other partner; (b) how to calculate the unused portion of the pensioner rebate to be transferred to the other partner; (c) how to calculate the pensioner rebate for a partner to whom some unused pensioner rebate has been transferred; and (d) how to calculate the adjusted pensioner threshold for a partner to whom some unused pensioner rebate has been transferred.

A number of terms used in this Ruling are explained in the Definitions section of the Ruling (see paragraph 10).

Where; (a) two people are members of a couple; (b) one partner is in receipt of a Social Security or Veteran's Entitlement rebatable partnered pension and the other is in receipt of either a Social Security or Veteran's Entitlement rebatable partnered pension or exempt pension; (c) neither partner is (i) entitled to a greater benefit from a beneficiary rebate, or (ii) in receipt of job search, Austudy, Abstudy, or sickness benefits on the last day of that financial year; and (d) the tax calculated on a partner's taxable income is less than the pensioner rebate; then the unused portion of the pensioner rebate may be transferred to the other partner.

The unused portion of the pensioner rebate is the difference between the maximum available partnered pension rebate and the tax calculated on the greater of the taxable income or notional taxable income.

By notional taxable income we mean the taxable income plus any exempt pension income.

The pensioner rebate for a partner to whom some unused pensioner rebate has been transferred is referred to as the maximum adjusted rebate. The maximum adjusted rebate is the partnered pensioner rebate plus the unused portion of the pensioner rebate transferred from the other partner.

The adjusted pensioner threshold is the tax free threshold plus the maximum adjusted rebate divided by the lowest marginal tax rate.

Finally, the rebate to which this partner is now entitled to is (a) the maximum adjusted rebate less (b) the difference between (i) he taxable income, and (ii) the adjusted pensioner threshold, all divided by 8.

This Ruling applies to years commencing both before and after its date of issue. However, the Ruling does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Ruling (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).

The following definition of key terms apply for this Ruling: partner or partnered - means a person who is a member of a couple which is defined as a person who is (a) legally married to another person and not living separately and apart from the other person; or (b) not legally married but living in a marriage-like relationship with a member of the opposite sex and both parties are above the age of consent and the relationship is not a prohibited relationship under 23 B of the Marriage Act 1961 rebatable pension - has the same meaning as appears in subsection160AAA(1) i.e. means a pension, allowance or benefit under (a) the Veteran's Entitlements Act 1986 (other than Part VII); or (b) the Social Security Act 1991 (other than Part 2.11, 2.12, 2.14 or 2.15) rebatable partnered pension - means a rebatable pension paid to; • partnered pensioners where the pensioner receives the partnered rate of pension during the year; or • partnered pensioners where the pensioner receives the separated rate of pension during the year, because as a result of illness or infirmity the couple are unable to live together. pensioner rebate - has the same meaning as appears in subsection160AAA(2) and for the following years is; 1990/91 1991/92 1992/93 Single rate 912 932 972 Partnered rate 599 618 654 Partnered rate (Separated by illness) 859 880 920 pensioner threshold - means the maximum taxable income at which the pensioner is entitled to the full rebate. That is, the rebate reduces by 12.5 cents for each dollar of additional taxable income when the taxable income exceeds those thresholds. The thresholds for the following years are 1990/91 1991/92 1992/93 Single rate 9,699 10,060 10,260 Partnered rate 8,172 8,490 8,670 Partnered rate (Separated by illness) 9,441 9,800 10,000. exempt pension income - means a Social Security or Veteran's Entitlement pension which is not normally subject to tax and includes amongst other pensions; (a) an invalid pension and equivalent service pension paid to a man less than 65 years of age or a woman less than 60 years of age; (b) a carer's pension and carer's service pension where both the carer and the pensioner being cared for is either a woman less than 60 years of age or a man less than 65 years of age; and (c) a partner's pension where it is paid to the partner of an invalid pensioner (including a service pension) to a woman less than 60 years of age and a man less than 65 years of age Note: This list is not exhaustive. notional taxable income - means the sum of the taxable income plus any exempt pension income. rebatable benefit - has the same meaning as appears in subsection 160AAA(1) beneficiary rebate - has the same meaning as appears in subsection 160AAA(3)

The year is the 1991/92 year. Mr and Mrs Young are both pensioners in receipt of rebatable partnered rate pensions. Mr Young's Taxable Income is $6,900. Mrs Young's Taxable Income is $14,000. Neither Mr nor Mrs Young are in receipt of exempt pension income. The maximum pensioner rebate available to Mr Young is $618. The tax calculated on his taxable income of $6,900 is $300. How to calculate the unused portion of the rebate to be transferred to Mr Young's partner. The unused portion of the pensioner rebate is the difference between the maximum available partnered pension rebate and the tax calculated on the taxable income or notional taxable income. In Mr Young's case because he receives no exempt income it is the difference between $618 and $300 which is $318. How to calculate the pensioner rebate for Mrs Young. Mrs Young's maximum adjusted rebate is the partnered pensioner rebate plus the unused portion of the pensioner rebate transferred from Mr Young. That is, $618 plus $318, which is $936.