Tax Benefits for People with Disabilities

Only two things are certain in life - and taxes are one of them!

Come July each year, people across Australia are scrambling to lodge their tax returns. Although the Australian Tax Office (ATO) provides a quick guide to the offsets you can claim on their website, it can be a puzzle trying to piece together all the different deductions and benefits you might be entitled to.

It’s important to know what your responsibilities and rights are. If you’re an Australian with a disability, you may benefit from extra deductions and offsets on your tax. If you don’t have an accountant, you might be able to access free tax advice and help from ATO-trained volunteers through the Tax Help program. You can view a complete list of tax deductions and offsets for people with disabilities on the ATO’s website, or continue reading for our easy-to-understand summary. 

Tax Free Pensions and Government Payments

A broad selection of Centrelink and government payments for people with disabilities are exempt from tax. These include, but are not limited to, the disability support pension, child disability allowance, and the VA disability pension. You can read a more complete list of tax-exempt payments on the ATO’s website, here.

Tax-exempt NDIS Funds

If you‘re a participant under the National Disability Insurance Scheme (NDIS), your funds are likely to be exempt from tax. You may still need to pay tax and GST on goods and services that purchased with NDIS funding, or withhold PAYG income tax for any carers you pay with your funds. You can read more about how your NDIS funds are affected by tax here.

Tax Offsets

Tax offsets can directly reduce the amount of tax you need to pay. There are many offsets available, and your eligibility for each will depend on your personal circumstances and income. You should consult a tax professional or the Tax Help program for more detailed advice about any offsets your may be entitled to. In general, you might be eligible for an offset if you are a senior Australian, pensioner, recipient of certain government allowances, are a low income earner, or if you maintain certain dependents or a carer.

Some of these relevant offsets include:

Private health insurance: You may be able to claim an offset or a premium reduction based on your private health insurance policy.

Eligible government benefits: You may be able to claim the beneficiary tax offset if you received certain government allowances and payments during the tax year. You’ll pay no tax at all if your only income was a qualifying government benefit or allowance.

Carers and dependents with disabilities: If you maintained a carer or a person with a disability, you may be able to claim a tax offset for this.

Medical expenses: Australia’s net medical expenses offset is being phased out, but is still valid until the 2018-2019 financial year’s end. This offset is restricted to eligible expenses for disability aids, attendant care, and aged care, and does not include services or goods paid for by the NDIS or private health insurance.

Low income earners: If you are a low income earner, the ATO will assess your eligibility and automatically apply this offset to your tax where relevant.

Tax Concessions on Your Vehicle

If you are a veteran and/or a person with a disability, you could be eligible for a tax concession when you buy, lease, or modify a car to install medical aids. You may also be eligible to receive an exemption on the luxury car tax, and purchase or lease a car GST-free. This would also entitle you to purchase car parts GST-free. You can read more about vehicle-related tax exemptions and offsets here.

Medicare Levy Exemption and Reduction

The Medicare levy is a tax that helps to fund our national healthcare scheme. Depending on your taxable income and personal circumstances, you may be eligible for a reduction in or exemption to this levy. If your income is less than the lower threshold amount (as listed here), you will be exempt from contributing to the levy.

If it is higher than the minimum, but lower than the maximum, you will be entitled to a Medicare levy reduction. There are other special circumstances which affect your payment amount, so it is worth investigating your obligations.

Summary

The wide world of tax offsets can be confusing at best. If you are in need of help, reach out to the ATO to enlist in their Tax Help program, or get in touch with a tax accountant in your local area. Be sure to have your tax completed and lodged by October 31 to avoid penalties (and to get your return in time for Christmas!)

To read more about your entitlements, head over to the ATO’s page for people with disabilities here.