Do I still need to lodge a tax return? The retiree's annual question

# Do I still need to lodge a tax return? The retiree's annual question

For many Australians, the move into retirement quietly changes the tax-return obligation. Working-age employees almost always need to lodge — there is PAYG withholding to reconcile, salary above the tax-free threshold, deductions to claim. Retirees often don't. Super pension payments from age 60 are tax-free and don't even count as assessable income on the return; the Age Pension is taxable but, after the Seniors and Pensioners Tax Offset (SAPTO) and the basic tax-free threshold, often produces no tax liability; and modest investment income may be comfortably covered by the senior offsets too. So plenty of retirees end up below the lodgement threshold and don't legally need to lodge. But — and this is the bit most retirees get wrong — the question of "do I need to lodge?" is not the same as "should I lodge?". The biggest miss is refundable franking credits: a retiree holding $200,000 of fully-franked Australian shares yielding 4% is entitled to roughly $3,400 a year of franking-credit refunds that the ATO won't return unless they are claimed, either by lodging a full return or by submitting a separate Refund of Franking Credits application. A "you don't need to lodge" notification from the ATO is correct on the lodgement obligation but says nothing about whether you would benefit from lodging anyway. This article walks through when you must lodge, when you can use a non-lodgement advice instead, and the scenarios where the right answer depends on more than the headline rule.

Why retirees often stop needing to lodge

It comes down to the income shape changing. Pre-retirement, salary income is well above the $18,200 tax-free threshold (ATO, https://www.ato.gov.au/tax-rates-and-codes/tax-rates-australian-residents), PAYG withholding is in place, and the annual return reconciles tax paid against tax owed. Post-retirement, three things shift. Super pension payments for over-60s are tax-free and aren't even on the return. The Age Pension is taxable, but for many retirees it is the only major taxable income, and once you add SAPTO, the Low Income Tax Offset (LITO), and the tax-free threshold, the effective tax-free amount for a single SAPTO-eligible senior is around $35,000 (ATO, https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/tax-offsets/seniors-and-pensioners-tax-offset), and roughly similar per partner in eligible couples. And other income — bank interest, dividends, modest rental income — is often small enough to be absorbed comfortably by the offsets. The result for a typical full-Age-Pensioner with no shares and no other income is no tax payable and no return required.

When you must lodge

You generally need to lodge a return if any of a handful of things apply: tax was withheld from any payment during the year (for example, bank interest or dividends paid without a tax file number quoted, or part-year employment income); your taxable income exceeds the $18,200 tax-free threshold and isn't fully covered by SAPTO and LITO; you received assessable foreign income (a UK or other foreign State Pension, US Social Security where applicable, foreign dividends, or foreign rent); you had business or sole-trader income of any consequence; you realised a capital gain not covered by an exemption; you are entitled to a refundable tax credit you want to claim (most importantly, refundable franking credits); you received an employment termination payment or other concessionally taxed payment that needs reporting; or the ATO has issued a return-required notice. If none of those apply, you generally don't need to lodge — but see below on whether you might want to anyway.

The non-lodgement option

Retirees with no lodgement obligation and no refunds to claim can submit a non-lodgement advice to the ATO, through myGov, in writing, or via a tax agent. The advice tells the ATO that no return is required for the year, stopping the reminder letters and unfollowed-up notices that otherwise accumulate. A new non-lodgement advice is needed each year if the situation continues. The ATO sometimes proactively sends a "you don't need to lodge" notification based on its own data — useful, but trust it only on the lodgement obligation, not on whether you would be missing refundable credits by not lodging.

The franking-credits trap is the most common missed-money issue

Australian residents who receive fully-franked dividends from Australian companies are entitled to a refundable franking credit — the imputation credit attached to the dividend is paid back if the recipient's tax position doesn't otherwise use it (ATO, https://www.ato.gov.au/individuals-and-families/investments-and-assets/shares-funds-and-trusts/investing-in-shares/refund-of-franking-credits-for-individuals). For a retiree on the Age Pension and a tax-free super pension, this typically means the full franking credit comes back as a cash refund, and the numbers can be material. A retiree holding $200,000 of fully-franked Australian shares yielding 4% is receiving about $8,000 in dividends and around $3,400 in franking credits — and that $3,400 only comes back if it is claimed. Without lodging a return (or submitting a Refund of Franking Credits application), the money simply stays with the ATO. Over a 20-year retirement, that is roughly $68,000 of foregone refunds — far more than the cost of lodging.

The stand-alone Refund of Franking Credits application

For retirees who don't need to lodge a full return but want their franking credits, there is a separate Refund of Franking Credits application, available through ATO online services, on paper, or via a tax agent (ATO, https://www.ato.gov.au/individuals-and-families/investments-and-assets/shares-funds-and-trusts/investing-in-shares/refund-of-franking-credits-for-individuals). It is simpler than a full return — it just confirms the dividend income and claims the credits. In practice, though, most retirees with franked shares lodge a normal return because it is the same process they have used for years and captures everything in one go. Either path gets the credits back.

What changed this tax time: automatic franking credit refunds

Everything above about franking credits was written on the assumption that an unclaimed credit stays unclaimed. That assumption has partly changed, and it matters most to exactly the retirees this article is about.

The ATO has said that during tax time 2026 it will automatically refund franking credits to eligible individuals and issue a notice of assessment, using information that share registries report to it — and that unless the ATO advises otherwise, eligible people will not need to apply (ATO, https://www.ato.gov.au/individuals-and-families/investments-and-assets/shares-funds-and-trusts/investing-in-shares/refund-of-franking-credits-for-individuals, as at August 2026).

Three qualifications travel with that, and all three matter. It applies to eligible individuals, not to everyone holding a franked dividend. It runs on information reported by share registries, so holdings outside that reporting may not be picked up. And it applies unless the ATO advises otherwise.

So the practical instruction changes from "claim it" to "check it arrived." If you normally receive franking credits back and nothing appears, that is a signal to follow up rather than to assume it has been handled for you. The stand-alone application described above remains the route where an application is still needed.

The lodgement thresholds, in figures

For someone eligible for SAPTO, the 2025-26 lodgement test is on rebate income, which does not include a spouse's. You must lodge if it was more than $34,919 where you were single, widowed or separated at any time during the year; more than $33,732 where you had a spouse but one of you lived in a nursing home or you had to live apart due to illness; and more than $30,994 where you lived with your spouse for the full income year (ATO, https://www.ato.gov.au/forms-and-instructions/individual-tax-return-2026-instructions/completing-the-individual-tax-return-2026/do-you-need-to-lodge-a-tax-return-2026 — all 2025-26 figures).

Note that the couple-living-together figure is the lowest of the three, which catches people out: two people with modest incomes can each be required to lodge at a level where a single person would not be.

Rather than work from any table, including that one, the better move is the ATO's own "Do I need to lodge a tax return?" tool, available on its website and through ATO online services. Accessed through ATO online services it draws on information the ATO already holds and tailors the result — which covers every category rather than the common ones, and does not go stale each July.

Why SAPTO being non-refundable matters here

The Seniors and Pensioners Tax Offset reduces tax payable to zero but doesn't generate a cash refund by itself, so SAPTO on its own doesn't reward lodgement. Franking credits do — they are refundable, so they convert to cash when claimed even where there is no tax payable. This distinction is exactly why retirees with shares should lodge (or use the Refund of Franking Credits application), while retirees with only the Age Pension and no shares often shouldn't bother.

Common scenarios

A handful of patterns cover most retirees. A full Age Pensioner with no investments, where the Age Pension is the only income, has no tax payable after SAPTO and the tax-free threshold, so a non-lodgement advice is usually appropriate. A self-funded retiree with a tax-free super pension and modest bank interest is generally in the same position — non-lodgement advice. A retiree with franked Australian shares, on the other hand, should lodge (or use the Franking Credits Refund application) to capture the refundable credits. A retiree with an investment property must lodge a full return, since the rental income is assessable and deductions are claimable. A retiree with a foreign pension (a UK State Pension, US Social Security, and so on) must lodge, because the foreign pension is assessable in Australia under the relevant double tax agreement. And a retiree who realised a capital gain on shares has a lodgement obligation triggered by the CGT event, with the 50% CGT discount applied if eligible.

The annual workflow

The workflow is straightforward. After 30 June each year, review a few questions: was any tax withheld during the year, did you receive any foreign income, did you realise any capital gains, and are there franking credits to claim? If any of these apply, lodge a return; if none apply, submit a non-lodgement advice. The sensible default is to lodge a full return for any retiree with investment income — it is the same workflow you are used to, it captures the franking credits and any other refundable amounts cleanly, and the tax-agent fee (typically a few hundred dollars for a straightforward retiree return) is modest and itself deductible the following year. Where complexity arises — multiple investment properties, multiple share parcels with CGT events, foreign income, SMSF distributions, or trust income — tax-agent help is usually worth the cost.

Worked examples

These two cases show the lodgement decision in practice. They are illustrative only and not personal advice, and lodgement obligations should be confirmed with the ATO or a registered tax agent.

Eilish, 71, single, receives the full single Age Pension (around $31,200 a year). She has $40,000 in a high-interest savings account earning about $1,800 a year, no shares, no investment property, and no foreign income, and the ATO has told her she doesn't need to lodge. On these facts, the ATO's notification is correct on the lodgement obligation: her total taxable income (Age Pension plus interest) is around $33,000, below the effective SAPTO-supported tax-free threshold for a single senior of around $35,000 (ATO, https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/tax-offsets/seniors-and-pensioners-tax-offset), so no tax is payable, and she has no refundable credits to claim, since bank interest carries no franking credits. On these facts it is generally rational to submit a non-lodgement advice each year via myGov, which also stops the ATO's follow-up letters, while keeping good records of her interest and Centrelink statements in case her circumstances change. There is nothing to gain by lodging — a clean, simple position.

Norman, 74, single, has $280,000 in an account-based pension (drawing the minimum, tax-free), a small part Age Pension (around $8,000 a year), and a $250,000 portfolio of fully-franked Australian shares yielding about 5% — roughly $12,500 a year of dividends with about $5,350 a year of franking credits attached. He has been receiving the ATO's "you don't need to lodge" notification for three years. On these facts, Norman has been leaving money on the table — about $5,350 a year of refundable franking credits he hasn't claimed, perhaps $16,000 over the three years. The ATO's notification is technically correct (his taxable income is comfortably covered by SAPTO, so there is no tax payable), but it doesn't mention that he could claim the franking credits as a refund (ATO, https://www.ato.gov.au/individuals-and-families/investments-and-assets/shares-funds-and-trusts/investing-in-shares/refund-of-franking-credits-for-individuals). On these facts it is generally rational to lodge a full return for the current year (or use the stand-alone Refund of Franking Credits application — same outcome on the credits) and to ask a tax agent about back-claiming the prior years' franking credits, since refunds for earlier years can often still be claimed within the ATO's time limits. The agent fee of a few hundred dollars is comfortably justified by $5,350 a year of refunds, and going forward Norman should lodge each year to capture the credits cleanly. The lesson is that the ATO's "you don't need to lodge" notification is right on the obligation but says nothing about whether lodging would benefit you — and for any retiree holding fully-franked Australian shares, the answer is almost always yes.

For retirees facing the annual tax-return question, the framework is to review each year what income sources and refundable credits apply, to lodge full returns by default where there is any investment income (the franking-credit refund usually justifies the modest tax-agent fee comfortably), to use a non-lodgement advice for the genuinely simple cases (Age Pension or super pension only, no shares, no foreign income, no capital gains), and never to assume the ATO's pre-determination is the final word, particularly where franked Australian shares are in the picture. The figures move with policy and indexation, so confirm the current tax-free threshold, SAPTO thresholds, and lodgement rules with the ATO or a registered tax agent before relying on them — but the shape of the decision is durable. The biggest practical message: for retirees with franked Australian shares, lodging is almost always worth it, and the franking credits you are entitled to don't come back if you don't claim them.

Sources

• ATO — Tax rates: Australian residents
• ATO — Seniors and pensioners tax offset (SAPTO)
• ATO — Refund of franking credits for individuals
• ATO — How to apply for a refund of franking credits
• ATO — Do you need to lodge a tax return? 2026
• ATO — Lodge a non-lodgment advice

This article contains general information only. It does not constitute personal financial or tax advice and does not take into account your individual financial situation, objectives, or needs. Tax-return obligations and refund entitlements depend on your individual circumstances and the rules in force at the time; the $18,200 tax-free threshold, the SAPTO thresholds and the rebate income lodgement thresholds quoted are current for 2025-26. The automatic refund of franking credits described applies to eligible individuals during tax time 2026 based on information reported to the ATO by share registries, and does not guarantee that any particular person's refund will be issued without an application — check that yours has arrived. Before acting on any information in this article, confirm your specific position with the ATO or a registered tax agent. Information is current as at 10 August 2026.

Theodore Karoumbalis is an Authorised Representative (No. 1237098) of iAdvice Technology Pty Ltd, AFSL 526700.