How Much Can a 65 Year Old Earn Without Paying Tax: Australian Tax-Free Thresholds Explained

Picture this: you’re 65, the so-called retirement age in Australia, and you’ve ditched the alarm clock. But even with work in the rearview, that question keeps popping up—how much can you actually earn without giving a slice back to the ATO? Whether you’re eyeing a part-time gig, renting out the spare room, or just counting pennies from Super, what you don’t know about tax rules could cost you. Let’s settle it once and for all: how much can a 65 year old make without paying taxes—or at least, without paying more than you should?

The Tax-Free Threshold for Over-65s in Australia: What’s Different?

If you’ve always stuck with the standard tax-free threshold in Australia—currently $18,200 per year for adults—it might surprise you that seniors often get a better deal. The Australian government knows a lot of older Aussies still want, or need, to keep earning, which is where the Seniors and Pensioners Tax Offset (SAPTO) steps in. This offsets your tax if you qualify, pushing your effective tax-free earnings well beyond the usual limit.

Here’s the breakdown for the 2024–25 tax year:

Pretty big leap, right? That’s near double for a single person. Not all income is treated equally, though: some government payments (like the Age Pension), Superannuation withdrawals, and investment earnings slip under the tax radar up to certain limits. But what matters most? The type of income and whether you meet SAPTO’s criteria. That means being at least 65, meeting residency rules, and staying under an income cap.

And don’t forget—Australia’s income tax works in tiers. Even if you make a bit over the limit, you still only pay tax on the piece that tips you over, not every cent. So, if your taxable income is $35,000 and your personal SAPTO threshold is $33,882, tax is only due on that $1,118 sliver. Easy enough to remember.

SAPTO rules and qualifying can get murky fast. Here’s what you need to keep in mind:

• You must be eligible for the Age Pension, even if you don’t receive it. That mainly hinges on your income and assets.
• Your annual adjusted taxable income (which can include Super, investments, or fringe benefits) must stay under the cap, or the benefit tapers off quickly.
• If both you and your spouse qualify, you each get a slice of SAPTO, but split thresholds.

If you’re working, the 65 year old tax free income Australia rule kicks in. As long as you’re under those SAPTO figures, you won’t pay a cent in tax—plus, the Medicare Levy might not apply if your income is below the surcharge level (which is $24,276 for singles and $38,365 for couples in 2025).

Quick story: Graham, from Newcastle, picked up three days a week at Bunnings after retiring from transport. By using SAPTO, he stays under $33,800 and avoids tax entirely—while also clocking extra for a family road trip. Smart move.

Finally, not all states in Australia allow extra rebates on seniors’ taxes, but it’s worth checking your local council for bonuses on land tax or rates.

How Income Sources Affect Your Tax-Free Threshold: Work, Super, Investments, and Beyond

Not every dollar coming in gets taxed the same way, especially once you’re 65. If you’re pulling income from different places, things can stack up—or keep you clear of tax altogether.

Let’s break down the main income streams for older Aussies:

• Paid Work: Whether you’re on the payroll, freelancing, or consulting, every taxable dollar counts toward your threshold.
• Superannuation Drawdowns: After age 60, withdrawals from a taxed super fund are tax-free for most people. So if your Super’s your main support, and it’s from a compliant fund, you could take as much as you like that won’t push you over the SAPTO limit. Paying yourself a ‘retirement income stream’ is completely tax-free for many seniors.
• Age Pension: The main government pension is not taxed, but it still counts toward eligibility for SAPTO. If you only get the pension, you’re almost certainly under the tax-free limit anyway.
• Investment Earnings: Rent from an Airbnb, income from shares, or interest from the bank? That all goes in your taxable pot. If you have franked dividends, though, you can often claim the franking credits as tax offsets and reduce your bill.
• Casual Income: Selling craft at the markets, a few weeks’ consulting, or tutoring the grandkids’ friends. The ATO still sees this as taxable income, but you can claim business deductions if you’re operating as a small business or sole trader.

If you’ve got an account-based pension that started after retirement, that money is usually tax-free too, as long as your Super fund is ‘taxed’ (almost every Australian fund is). From a tax perspective, that’s one of the main perks of crossing 60.

Dorothy, from Wollongong, keeps her permanent part-time job and adds the occasional shift as a way to stay social. Her total sits at $26,000 for the year, including a handful of art sales. Because she’s under the single SAPTO threshold—even with the extra money—she doesn’t pay any tax.

If you’re making money through property (renting your investment flat, for example), costs like repairs, agent fees, and borrowing interest are tax-deductible, which can drag your taxable income way down. But watch for capital gains tax if you sell something you’ve held for a long time.

Keep an eye on Centrelink, too. Even though many investments are ‘deemed’ to earn a set interest rate (rather than their actual return), high real-world returns could push you over the SAPTO limit or impact your eligibility for government concessions.

• Keep salary-sacrificing into Super before you retire—it grows tax-free and won’t bloat your reported income after 65.
• Spread income sources smartly: stagger withdrawals, take advantage of tax credits, and avoid selling big assets in one hit.
• Every extra deduction (home office, travel for work, interest expenses) shaves off taxable income, so keep receipts tight.

Fun fact: According to 2024 ATO data, nearly half of seniors who took up part-time work paid zero tax, thanks to SAPTO and tax-free Super withdrawals. That’s real cash in your pocket—money for holidays, spoiling the grandkids, or Sunday avocado toast.

Smart Ways to Maximise Tax-Free Income at 65 and Over

Now you know the rules, but tax law changes all the time, and the ATO doesn’t exactly send postcards about tweaks. So, how can you make the most of every dollar—and stay on the safe side?

First, double-check your eligibility for SAPTO each year. If your spouse starts a pension or you receive a new benefit, those numbers move. Even a small rise in investment returns can nudge you over a threshold. Use the ‘ATO tax offset calculator’ each July to plug in your numbers for the new financial year.

• Plan work hours: Consider working a couple of days a week or during high-paying gig times, instead of full-time. Too much extra work can push you over the SAPTO edge.
• Strategic Super withdrawals: Lump sums and pension draws aren’t taxed after 60, so if you need extra cash, aim to draw from Super instead of loading up taxable work income.
• Income smoothing: If you’re selling an asset, split it across two financial years if possible to keep your tax bill down.
• Deduct and conquer: If you’re running a small business, claim legal deductions—supplies, car costs, a home office, and even some phone bills. Every deduction means more tax-free space.
• Health insurance: The Medicare Levy can sneak up if you go just over the limit, but private health insurance can keep extra fees at bay.

There’s also the Work Bonus, which lets you earn up to $300 a fortnight (or $7,800 a year) from work before your Age Pension is reduced. If you’ve had a break from working (like for hospital or family reasons), that bonus can still build up, giving you even more flexibility.

Here’s a myth-buster: Sharing assets or giving a ‘gift’ to family doesn’t automatically shelter that amount from the ATO. Gifting more than $10,000 a year (or $30,000 over five years) can affect your pension eligibility, and sometimes tax status, too.

Tech tip: The ATO's myGov platform keeps a running tally of your taxable income, superannuation balances, and deductions. Check it often—the numbers update as your employer reports. It's like a dashboard for staying under the tax radar.

One pitfall to avoid: Mistaking non-taxable income (like lottery winnings or some Centrelink emergency relief) for money you can spend without worry. These don't affect SAPTO, but investment income, work bonuses, and some foreign pensions do.

And if you do slip over the line, the regular ATO income tax rates kick in above each threshold—starting at 19 cents per dollar. The quick fix? Keep receipts, track every deduction, and consider a yearly chat with a registered tax agent, especially if your income is all over the shop.

No matter what, remember you’re never too old to earn. The Australian tax-free rules for 65 year olds are surprisingly generous. Whether you want to pull in a little extra or just know when to stop clocking extra hours, getting these details right means more money for what matters—freedom, fun, and a good flat white down at the beach.