Mature age worker tax offset

Note: As part of the 2012 Federal Budget, the government announced that from July 1, 2012, eligibility for the mature age worker tax offset will be confined to individuals born before July 1, 1957. This means individuals must have turned 55 prior to July 1, 2012 to receive this offset. Otherwise, the offset remains unchanged. This new date of birth eligibility requirement applies to 2013 and future year returns.

You may have seen magazine covers with lines like 'Is 50 the new 30?', or maybe 'the new 40'... but the idea that 50-plus is no longer the gateway to geezerville is gaining traction.

Over-55 is not considered over-the-hill anymore, and those once considered perhaps 'getting on a bit' are working longer. The social trend for fitness and health awareness is only increasing the grey headcount in the workplace – and the taxman is helping.  Contributing to this 50-plus fountain of youth (in a small but encouraging way) is a tax offset that is available for workers aged 55 and over.

The mature age worker tax offset has been available since 2004, and the Tax Office says it is there to encourage, and reward, mature age workers to stay in the workforce. Being an 'offset' it is used to reduce your tax, not your taxable income, and the maximum offset you can gain under this scheme is $500 a year.

The offset is calculated from your 'net income from working', which generally comprises wages and salaries, other employment-related income and income from carrying on a business as a sole trader or as a partner in a partnership, less 'allowable' related deductions. It also includes reportable fringe benefits, which are not taxable to you.

Passive income, such as interest, rent, capital gains, pensions, and dividends, are not included. Nor are government benefits or lump sum payments such as long service leave pay-outs.

The offset applies at five cents for every dollar earned up to $10,000. After that the full $500 offset applies up to $53,000, and from there to $63,000 it fades out again at the same five-cent rate (see table). Above $63,000 there is no offset offered.

If you are eligible, you don't need to apply. The offset will be calculated based on the numbers the Tax Office receives from your usual tax return. There's no option to be refunded any unused portion in a year or to carry it over to next year, and you can't transfer some to another taxpayer.

And don't confuse the mature age worker offset with the senior Australians tax offset or the pensioner tax offset – some people will be eligible for more than one of these offsets.

A final perspective
Staying in the workforce could be a help to everyone. The Intergenerational Report released by Treasury indicates that between now and 2050 the number of people aged 65 to 84 years old is expected to more than double. Those aged 85 and over will more than quadruple. 'The number of traditional working age people to support each retiree is expected to fall from five people today, to 2.7 people in 2049-50. In 1970, there were 7.5 working age people for each person aged over 65 years,' the report states.

An offset query answered:

I'm 58 years old but am still working at a direct marketing firm. Last financial year I earned $41,000 and commissions of $13,000. Can I get the mature age offset?

Well that's $54,000, so you're just over the cut-off for the full offset of $500. Any expenses we might be able to deduct?

Yes; I had work-related travel of $600, as well as seminars I went to, which was for $350, and telephone expenses too. They were only $70. Oh, and I part-own a rental property, and spent $500 on that. Do these help?

We can take away the work expenses, but not the property's $500. So we're looking at $41,000 plus $13,000, and then subtract your $600 and $350 and the $70, giving you $52,980. So you're under the cut-off of $53,000 to get the full offset. Any other income?

Well, I did get $1,000 in interest, and $5,000 from that rental property.

These aren't included in the 'net income from working' in the legislation. Looks like you're up for the full entitlement.