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Amendments have been made to the Income Tax Regulations 1936 to correct the way in which the amount of seniors and pensioners tax offset (SAPTO) is determined in the case of foreign residents for tax purposes: Income Tax Amendment Regulation 2013 (No 1) (SLI 2013 No 128; registered 14 June 2013).

The amendments correct an unintended consequence arising from amendments to the regulations which took account of the legislative amendments to the personal income tax rates and thresholds made as part of the Government’s Clean Energy Future Plan in 2012. The Income Tax Amendment Regulation 2012 (No 1) amended the regulations to reflect the merger of the pensioner tax offset (PTO) and the senior Australians tax offset (SATO) into the SAPTO in the Act.

The 2012 amendments achieved their stated purpose in relation to taxpayers who are Australian residents for tax purposes. However, incorporating the 2011-2012 tax free threshold into the formula increased the amount of SAPTO available for transfer for foreign residents whose eligible spouse had taxable income greater than $6,000, which was not intended. The amount of SAPTO for foreign residents with a spouse receiving SAPTO who had taxable income greater than $6,000 was increased because reg 150AE(12) and 150AF(9) applied a formula which effectively allowed the individual a $6,000 tax free threshold, when foreign residents are not usually afforded a tax-free threshold under the tax laws.

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