Navigating tax time for retirees: Do you need to lodge a tax return?

Tax time can often feel complex and uncertain for retirees, especially as financial circumstances change post-career.

Understanding whether you need to lodge a tax return hinges on several factors tailored to retirement income and the types of earnings received.

For many retirees, income sources such as the Age Pension, superannuation, investments, and occasional employment can also influence tax obligations.

In an effort to understand your obligations come tax time, Starts at 60 sought the expertise of Andrew Lowe, Challenger Head of Technical Services to simplify the process and make it as straightforward and manageable as possible.

Lowe stresses that “those in retirement need to know their tax return lodgement obligations”.

“There are specific rules on whether a retiree has to lodge a tax return or not,” Lowe adds.

“For example, if you have had tax withheld from a payment, for example, maybe from a bit of casual work that you might have done for a short-period, then generally you are required to lodge a tax return.

“Income from a superannuation pension or superannuation annuity received on or after age 60 will generally be tax-free which makes super an attractive structure for retirement income.”

Many recipients of the Age Pension may find themselves questioning whether they need to lodge a tax return for their payments.

“Eligibility for the Age Pension does not automatically exclude recipients from having to lodge a Tax Return,” Lowe states.

“Where all of a person’s income is sourced from the Age Pension, and where no tax has been withheld from Age Pension payments, they will generally not be required to lodge a tax return.

“However, many Australian Age Pension recipients will have both income from the Age Pension as well as from other sources.  In such cases, they may be required to lodge a tax return and may also be required to pay tax on their income (including income from the Age Pension).

“However, the availability of the Low Income Tax Offset (LITO) and Senior Australians and Pensioners Tax Offset (SAPTO) means that Australians of Age Pension age can generally earn more than younger Australians before being liable to pay tax.”

In addition to understanding lodgement obligations, Lowe also highlights the deadlines during tax time and underscores the importance of meeting them.

“If you have to lodge a tax return, then doing the return within required deadlines is important,” he says.

“Usually, if you don’t use a tax agent to lodge your tax return, it is due by 31 October. When you use a tax agent, the lodgement deadline is extended.”

Tax time can be stressful for anyone, but it can be especially challenging for retirees navigating their financial obligations in their post-work life. In order to make the entire process as seamless as possible, Lowe suggests ensuring “you have all the required information such as your tax-file number, income from all sources and deductions which you want to claim”.

“When you are claiming a deduction, you should be able to prove that you have incurred the expense, if audited,” he explains.

“It’s always difficult to look for records at the last minute so it helps to be prepared to not only prepare your tax but also keep records for the future, usually for a period of up to 5 years.”

While there are various rules relating to what you can claim as a tax deduction, some of the usual tax deductions include:

• Expenses that you might have incurred in receiving investment income such as from shares and rental properties
• Charitable donations
• Non-super income protection premiums
• Superannuation related deductions (with increasing limits from 1 July this year).

While navigating your tax obligations in retirement can be daunting, ensuring you gather the necessary documentation and utilising professional advice can streamline the process and ensure compliance with regulations.

By staying informed and proactive, you can manage your financial responsibilities effectively, optimising your tax outcomes and securing your retirement finances for the future.

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.