I WAS asked the question from a person who had retired in 2001 and relies on the Age Pension and dividends from a small share portfolio to meet their living expenses, if they need to lodge a tax return.
The retiree had previously lodged an income tax return via a tax agent to access their refund on the franking credits from their share portfolio. They consequently asked if they have to lodge a tax return as they don't receive enough income to pay tax? Is there a simpler way to mange this issue?
Retirees who are eligible for the Seniors and Age Pensioners Tax offset (SAPTO) and have rebatable income of less than $32,279 as a single (or $28,974 each if a member of a couple), are not obliged to lodge an annual tax return provided they meet these criteria and are not subject to the following circumstances. You would be obliged to continue to submit annual tax returns if any of the following circumstances apply:
- You receive income as a Pay-as-You-go employee where tax was withheld.
- You received reportable Fringed Benefits in the financial year.
- You carried on a business as a self-employed person.
- You received a distribution from a trust.
- You received income from foreign employment, investments or pensions.
- You have not claimed your Private Health Insurance Rebate and wish to do so.
- You wish to claim tax deductions for donations or eligible expenses.
- You have made a capital gain in the current year or a loss in this year o earlier years that you wish to claim.
- You own foreign assets worth more than $50,000 in Australian Dollars.
- You made a personal contribution to Superannuation and you are entitled to claim a Tax Deduction or receive the Government Co-contribution (for those under 71).
- You have received an Australian Superannuation lump sum where there was an untaxed component or you received a lump sum death benefit paid to you as a non-dependent.
- Assuming that you do not fall into the above category and your income falls within the SAPTO limits, then you would not need to lodge a tax return.
Dividends paid to shareholders by Australian resident companies are taxed under a system known as imputation. This is where the tax the company pays is imputed to the shareholders. The tax paid by the company is allocated to shareholders as franking credits attached to the dividends they receive, typically the tax credit is 30 per cent.
If you are not required to lodge a tax return, you can claim a refund of the franking credits by lodging an 'Application for a refund of franking credits for individuals' with the ATO.
You can lodge the form online, via www.my.gov.au, complete a paper form and submit the records over the phone or via post direct to the ATO in your capital city.
Applications forms for the 2018 tax year are already available on the ATO website. Processing of the refund typically takes two weeks for online or telephone claims. Paper-based applications will take up to 50 days to process.
To order an application for refund of Franking Credits contact the ATO on 1300 720 092 or download the form www.ato.gov.au.
For further information contact the ATO on 132 865 or visit their website.
Q&A with The Coach first appeared on www.wealthpartners.net.au. Any general advice in this story doesn't take account of personal objectives, financial situation and needs.