There are no specific income tax incentives applicable to an individual working in Australia. However, there are a number of personal tax offsets that may have the effect of reducing tax payable or, in some instances, the cost of health insurance or child care.
Personal offsets generally take the form of tax rebates or tax offsets, which are, in most cases, available only to residents.
Dependant invalid and carer tax offset
The dependant invalid and carer tax offset is only available to taxpayers who maintain a dependant who is unable to work due to invalidity or care obligations. For the year ended 30 June 2023, the invalid and carer tax offset is capped at AUD 2,943 and is subject to abatement for the 'adjusted taxable income' of the dependant, cutting out if this exceeds AUD 12,054. This offset is only available where the taxpayer's adjusted taxable income is no more than AUD 104,432.
Other personal tax offsets
Other tax offsets include offsets for those residing in isolated areas, a Seniors and Pensioners Tax Offset, and rebates for certain lump sums received in arrears.
In addition, if taxable income is below AUD 66,667 a Low Income Tax Offset also applies for the 2020/21 and later income years at a maximum of AUD 700 if taxable income is less than AUD 37,501. The Low and Middle Income Tax Offset last applied to the 2021/22 income year.
A tax deduction is allowed for COVID‑19 tests (including polymerase chain reaction and rapid antigen tests) where they are purchased for work‑related purposes. There is no tax relief for any other medical expenses.
Health insurance premiums
A tax offset (or a rebate provided directly against the premium) is available for the cost of private health insurance premiums (which covers hospital treatment), provided certain eligibility criteria are met.
The applicable tax offset is income tested and depends on the age of the individual. For the period from 1 April 2023 through 31 March 2024, there is no entitlement where adjusted taxable income exceeds AUD 144,000 for singles or AUD 288,000 for families (previously 140,000 and 280,000, respectively, for the period ended 31 March 2023), regardless of the individual's age. For an individual under the age of 65, the offset for the period from 1 July 2022 through 31 March 2023 ranges from:
- 8.202% where adjusted taxable income is between AUD 105,001 and AUD 140,000 for singles or between AUD 210,001 and AUD 280,000 for families.
- 16.405% where adjusted taxable income is between AUD 90,001 and AUD 105,000 for singles or between AUD 180,001 and AUD 210,000 for families.
- 24.608% where adjusted taxable income is AUD 90,000 or less for singles or AUD 180,000 or less for families.
For individuals aged 65 years or over, higher offset entitlements are available and can be as high as 32.812% for those aged 70 years and over with adjusted taxable income of AUD 90,000 or less for singles or AUD 180,000 or less for families.
The offset entitlements are indexed annually.
Child care subsidy
A child care subsidy is available to assist eligible families with the cost of child care (i.e. long day care, family day care, occasional care, outside school hours care, vacation care, and registered care). The child care subsidy is not administered through the tax system.
Spouse contribution tax offset
If a resident spouse's assessable income (and reportable fringe benefits and employer superannuation contributions) does not exceed AUD 40,000, a resident may make a maximum rebatable contribution of AUD 3,000 for the spouse (including a de facto spouse) to a complying superannuation fund or retirement savings account (RSA) and obtain a spouse contributions tax offset. It is also a requirement that the spouse did not have a total superannuation balance in excess of the balance cap, i.e. AUD 1.9 million as at 30 June 2023 (up from AUD 1.7 million at 30 June 2022) for contributions made from 1 July 2023, or exceed the non-concessional contribution cap. The maximum offset is AUD 540 (the tax offset is the amount of the contribution x 18%) and applies if the spouse's assessable income (including reportable fringe benefits and employer superannuation contributions) is not more than AUD 37,000.
Innovation investment offset
Investors in an Australian Early Stage Innovation Company (ESIC) (broadly, a company that is at an early stage of establishment to develop new or significantly improved innovations with the purpose of commercialisation to generate an economic return) are provided with a non-refundable carryforward tax offset equal to 20% of the amount paid for the investment, subject to an annual offset cap of AUD 200,000 (including affiliates).
Australian resident shareholders (other than corporates) who have invested in certain Australian resident companies that undertake greenfield minerals exploration in Australia may receive 'exploration credits' that entitle them to a refundable tax offset equal to the amount of the credit.
In broad terms, an exploration credit is a conversion of the company's tax loss attributed to the company's exploration or prospecting expenditure into a distributable tax benefit in the form of the offset available to the investor.
The Junior Minerals Exploration Incentive (JMEI) applies in relation to newly issued shares in eligible exploration companies made in the 2017/18 through to the 2024/25 income years.
Small business income tax offset
A small business income tax offset applies to individuals who run small businesses (businesses with an aggregate annual turnover of less than AUD 5 million or who pay income tax on a share of the income of a small business partnership or trust.
The offset (capped to a maximum of AUD 1,000) is 16% of the income tax payable on the portion of an individual’s income that is small business income.