Tax Offsets and Rebates? 2025–26 Guide

Updated for the 2025–26 income year (tax returns lodged from 1 July 2026), with 2026–27 changes noted. Reviewed 19 October 2026.

Tax offsets (sometimes called rebates) directly reduce the tax you pay on your taxable income – unlike deductions, which reduce your taxable income. Most offsets are non-refundable: they can reduce your tax to zero but can't produce a refund on their own. Most are calculated automatically by the ATO when you lodge.

1. Low income tax offset (LITO)

For Australian residents, the LITO for 2025–26 is:

• taxable income $37,500 or less: maximum offset of $700
• $37,501 to $45,000: $700 minus 5 cents for every $1 above $37,500
• $45,001 to $66,667: $325 minus 1.5 cents for every $1 above $45,000
• above $66,667: nil

You don't need to claim it – it's worked out when you lodge. It can't reduce the Medicare levy. If you're under 18 with unearned income, LITO can't reduce the tax on that income.

2. Seniors and pensioners tax offset (SAPTO)

If you're eligible for an Australian Government pension or allowance (or of Age Pension age and eligible but not receiving it) and meet income limits, SAPTO can reduce your tax – sometimes so you don't need to lodge. For 2025–26:

The offset reduces by 12.5 cents for every dollar of rebate income above the shading-out threshold. Unused SAPTO can sometimes be transferred to an eligible spouse. From 2026–27 the thresholds change because of the tax cut to 15%; the maximum amounts stay the same.

3. Private health insurance rebate

Your entitlement to the private health insurance rebate depends on your income for surcharge purposes, your age and your family status. You can take it as a premium reduction through your insurer or as a refundable tax offset in your return. The ATO reconciles it when you lodge, which can result in an extra offset or an amount to repay. Your income also affects whether the Medicare levy surcharge applies if you don't hold appropriate hospital cover.

4. Beneficiary tax offset

Available if you receive certain Australian Government allowances and payments. If these are your only income, you generally pay no tax. Declare the payment at the correct item and the ATO calculates the offset.

5. Invalid and invalid carer tax offset

You may be eligible if you maintained a spouse, parent, spouse's parent, or a child or sibling aged 16 or over who received a disability support pension or similar, or a carer of your or your spouse's child or sibling with a disability. Income tests apply (based on adjusted taxable income).

6. Medical expenses tax offset – ended

The net medical expenses tax offset is no longer available. It was phased out and the last year it could be claimed (only for disability aids, attendant care or aged care) was 2018–19.

7. Super-related tax offsets

• Spouse super contributions offset: up to $540 if you contribute to your spouse's complying super fund and their income is below $40,000. The full offset (18% of up to $3,000 contributed) applies where their income is $37,000 or less, phasing out above that.
• Australian super income stream offset: may apply to the taxed or untaxed element of certain super income streams (for example, 15% of the taxed element or 10% of the untaxed element in eligible cases).

8. Zone and overseas forces tax offsets

If your usual place of residence is in a remote zone (Zone A, Zone B or a special area) for more than 183 days in the year, you may be eligible. Fly-in fly-out and drive-in drive-out workers whose usual residence is outside the zone generally aren't. For 2025–26 the fixed amounts (before any dependant-based amounts) are $338 (Zone A), $57 (Zone B) and $1,173 (special area). Use the ATO calculator if you have dependants.

9. Income tests

Many offsets use income tests such as rebate income, adjusted taxable income or income for surcharge purposes. Complete the spouse and income tests sections of your return accurately so the ATO calculates your offsets correctly.

10. Announced for later years

The 2026–27 Budget announced a $250 Working Australians Tax Offset from the 2027–28 income year. It doesn't affect 2025–26 or 2026–27 returns. Personal tax rates also drop: the 16% rate becomes 15% from 1 July 2026 and 14% from 1 July 2027.

Want to be sure every offset is applied? See our tax return service.