LITO and SAPTO are tax offsets — they reduce the tax you owe, dollar for dollar, rather than reducing your income. Both are non-refundable: they can take a tax bill down to zero, but not below (there's no cash refund of an unused offset). The ATO works them out and applies them automatically.
LITO — the Low Income Tax Offset
Available to every resident, LITO is worth up to $700 and is clawed back as income rises:
- Full $700 while taxable income is up to about $37,500.
- Withdrawn at 5c per $1 from there to about $45,000 (leaving $325).
- Then 1.5c per $1 until it cuts out completely near $66,667.
With the $18,200 tax-free threshold, LITO means a working-age person pays no income tax until they earn about $22,000.
SAPTO — the Seniors and Pensioners Tax Offset
SAPTO is an extra offset for people who have reached Age Pension age (67) and pass an income test. It's worth up to $2,230 for a single, or $1,602 each for a couple, and shades out at 12.5c per $1 of rebate income above the threshold — fully gone by about $50,000 (single).
What it adds up to: the effective tax-free threshold
Stack the tax-free threshold, LITO and (for seniors) SAPTO, and here's roughly how much assessable income each person can have before paying any income tax:
| Situation | Tax-free up to (per person) |
|---|---|
| Working age — tax-free threshold + LITO | ~$22,000 |
| Senior, single — adds SAPTO | ~$35,800 |
| Senior, member of a couple — adds SAPTO | ~$32,000 each |
Why most retirees pay little or no tax
The offsets are only half the story. From age 60 your account-based pension is tax-free and doesn't even count as assessable income — so it never uses up your tax-free threshold or your SAPTO. A retiree drawing, say, $60,000 a year mostly from a tax-free super pension can have very little assessable income, keep the full SAPTO, and pay no income tax at all. That combination is a big part of why retirement is such a low-tax phase of life.
In the planner
RetireWiz applies LITO to everyone and adds SAPTO once each person reaches Age Pension age (a couple is assessed per person, each with their own offset and threshold). Click any year on the tax chart to see the LITO and SAPTO reconciliation behind that year's income tax.