Non-lodgment advice for retirees: ending the annual tax return obligation cleanly

For many Australian retirees the annual tax return becomes an unnecessary administrative ritual. Once retirement income drops below the tax-free threshold of $18,200 — or, more practically, below the higher effective threshold that the Senior Australians and Pensioners Tax Offset (SAPTO) creates for eligible retirees — and once super pension income (tax-free from age 60 from a taxed fund) becomes the dominant source, many retirees have no tax payable and no obligation to lodge a return at all. But the obligation runs on by default: without specific notification, the ATO continues to expect a return each year, sends reminder letters, and can eventually issue a default assessment and a failure-to-lodge penalty. The ATO's non-lodgment advice (NLA) — still widely called the "Return Not Required" (RNR) — is the formal way to tell the ATO that no return is required for the year, ending the rolling obligation cleanly.

The lodgement rule in the income tax law is broad: an individual must lodge a return if their taxable income exceeds the tax-free threshold, if any tax was withheld during the year, or if specific other triggers apply (business income, foreign income, an ATO-issued lodgement request, a capital gain or loss to declare). For working-age Australians, almost all of those triggers apply most years, so the obligation is essentially automatic. For retirees the picture is different: super pension income from a taxed fund is non-assessable from age 60, the Age Pension is technically assessable but typically attracts no tax once SAPTO is applied, and many retirees have either no tax withheld or only very modest investment income. So a substantial number of retirees genuinely fall below the practical lodgement threshold — but few realise they can stop lodging, and the ATO doesn't write to tell them.

The SAPTO twist is what makes the threshold higher than $18,200 for eligible retirees. SAPTO is a tax offset, not a deduction, with a maximum value of $2,230 for a single and $1,602 for each member of a couple (FY25-26) — and combined with the Low Income Tax Offset, it lifts the effective tax-free threshold meaningfully. For an eligible single retiree the effective threshold sits around the mid-$30,000s of assessable income; for couples it's around the low-$30,000s each. The precise figure depends on how the LITO and SAPTO phase out at the boundaries, but the practical point for non-lodgment is that a SAPTO-eligible retiree can have assessable income well above $18,200 without owing any tax — and therefore without an obligation to lodge, provided none of the other lodgement triggers applies.

The criteria for a non-lodgment advice follow from this framework. An NLA is appropriate where the retiree's taxable income for the year sat below the relevant threshold (the tax-free threshold, or the higher SAPTO-adjusted threshold for eligible retirees), where no tax was withheld from any income during the year, and where none of the other lodgement triggers apply — no business income, no foreign income, no ATO-issued request, and no capital gain or loss to declare. For a retiree drawing tax-free super pension and a full Age Pension with no other income and no withholding, the criteria are clearly met. For one with modest interest from term deposits or a small share parcel paying unfranked dividends, the criteria may also be met if assessable income remains under the effective threshold and no tax has been withheld. The check is annual — circumstances change, and the position should be re-confirmed each income year.

The franking credit refund sits as a special case that deserves its own pathway. Many self-funded retirees hold Australian shares and receive franked dividends, which carry franking credits that are refundable in cash where the retiree has no tax payable. Claiming that refund normally requires lodging a return — which defeats the simplicity of the NLA position — but the ATO provides a much lighter alternative: the Application for refund of franking credits for individuals. It is open to individuals who would not otherwise need to lodge a return, captures the franked dividend income and franking credits, and produces the refund without a full lodgement. For retirees whose only "complication" is franked dividends, this simplified application is the right tool — preserving the post-NLA simplicity while still picking up the refund every year.

The exclusions matter. An NLA is not appropriate where any tax was withheld during the year (even small amounts from a part-time job, or PAYG withholding from specific income types) — a return is required to either get the withheld tax back or reconcile the position. It is not appropriate where a capital gain or loss arose (sale of an investment property, sale of shares above the cost base), or where foreign income was received (a foreign pension, foreign rental, or foreign dividends generally trigger lodgement regardless of amount), or where the retiree carried on a business in any form (even a modest consulting practice), or where the ATO has specifically requested a return for that year. Where any of these apply, full lodgement is required — even if previous years were perfectly suitable for an NLA. The trap that most often catches NLA retirees is a one-off capital gain on selling an asset; a client used to "not lodging" can easily forget that selling the investment property or a parcel of shares brings the year back into the lodgement net.

The lodgement process is simple. An NLA can be lodged through the myGov-linked ATO online services (selecting "Return not necessary" for the relevant year), through a tax agent, or on paper for those who don't use online services. In some cases the ATO will accept a "return not necessary in future years" position, which records the retiree as no further returns required and ends the annual obligation entirely. That is appropriate where retirement income is stable and below threshold for the foreseeable future, and it produces the cleanest outcome — there isn't even an NLA to lodge each year. For clients with stable, modest retirement income (a full Age Pension plus modest investment income, with no expected change), the indefinite position takes the obligation off their plate permanently.

The failure-to-lodge consequences are real but entirely avoidable. Where a return is technically required but not lodged, the ATO sends reminder letters, can issue a default assessment estimating the person's tax position (typically unfavourable to the taxpayer), and can apply a failure-to-lodge (FTL) penalty of one penalty unit per 28-day period overdue, capped at five units — and with the current penalty unit at $330, that is up to $1,650 at the maximum. None of those outcomes is catastrophic for a retiree with no actual tax liability, but the administrative stress of dealing with ATO follow-ups is real, and a default assessment can produce a position materially worse than reality. The NLA pre-empts all of it.

An NLA position is not permanent — it covers specific income years. If circumstances change in a later year (a return to part-time work with tax withheld, a capital gain on selling an asset, a new foreign pension, an inheritance generating new investment income), the lodgement obligation revives for that year. The client (or their tax agent) lodges a return for the changed year, and the right ongoing position is reassessed. The standing advice to NLA retirees is to flag any income change to their accountant and resume lodgement for any year in which a trigger arises.

What do worked planning examples show?

These two cases show when a non-lodgment advice applies. Illustrative only — not personal advice — using FY25-26 figures.

Case 1 — Robert, 72, full-rate Age Pensioner. The Age Pension is his only income source. He has about $30,000 in a savings account paying him roughly $1,200 a year in interest. No tax is withheld from the Age Pension or the interest. He has been having his accountant lodge a tax return for $300 each year, generating a nil result. On these facts, an NLA is clearly appropriate. Robert's taxable income (Age Pension plus a little interest) is comfortably below the SAPTO-adjusted effective threshold, no tax has been withheld, and none of the other lodgement triggers applies. On these facts the rational steps are to lodge a non-lodgment advice (or, if the ATO accepts it, a "no further returns" position), stop preparing annual returns and save the $300 accountant fee, and resume lodgement only if his income changes (an inheritance, a part-time return to work). The bank reports the interest to the ATO under third-party data matching anyway, so there's no risk in not lodging — the figure is on the ATO's record without Robert having to put it there.

Case 2 — Susan, 68, retired with a $1.2M account-based pension paying her about $80,000 a year tax-free (she is over 60 and the fund is a taxed fund) plus a share portfolio yielding about $25,000 a year in franked dividends with roughly $10,700 of franking credits attached. On these facts a plain NLA is not the right move, because Susan has a meaningful franking credit refund to claim — but a full tax return is also unnecessary, because her only assessable income is the franked dividends and, with SAPTO, no net tax is payable. The right tool is the ATO's simplified Application for refund of franking credits for individuals: it captures the franked dividends and the franking credits, produces the cash refund of the credits, and avoids the burden of a full return. On these facts the rational step is to use the simplified application each year while franked dividends remain the only "complication". The broader point is that the choice for a retiree is not just "lodge a return or don't" — there's a middle path designed for exactly this situation.

For retirees whose income has settled below the lodgement threshold, the non-lodgment advice is a small piece of administrative housekeeping that ends an ongoing obligation cleanly. The advice work is to check each retiree client's position each year against the criteria (income below the SAPTO-adjusted threshold, no tax withheld, no other triggers), lodge an NLA for years where appropriate or a "no further returns" position where retirement income is stable, use the simplified franking-credit refund application for clients whose only issue is franked dividends, and remind clients that the NLA position doesn't extend across changes in circumstances — any new income source, capital gain or other change reopens the lodgement obligation. Too many retirees keep filing returns from inertia long after the obligation has gone — the NLA ends that.

Sources

• Australian Taxation Office (ATO) — Non lodgment advice
• Australian Taxation Office (ATO) — Lodge a non lodgment advice
• Australian Taxation Office (ATO) — Seniors and pensioners tax offset
• Australian Taxation Office (ATO) — Refund of franking credits for individuals
• Australian Taxation Office (ATO) — Penalty units