RFBA, RESC & Spouse Income Tests Australia 2025–26 Guide

Updated June 15, 2026 by Eduyush Team

Australian Tax · Income Test Analysis · 2025–26

RFBA, RESC & Spouse Income: Where Each One Hits

A complete map of every income test in Australian tax — which include RFBA, which include RESC, which use spouse income, and the real impact on benefits, offsets and surcharges.

Financial year 2025–26 · Last reviewed June 2026 · Sources: ATO, ITAA 1997, FBTAA 1986

FY 2025–26 RFBA · RESC · ATI MLS & PHI tiers Spouse income tests

Quick answer

RFBA (reportable fringe benefits amount) and RESC (reportable employer super contributions) are added back to income for most Australian income tests — even though neither is taxable income. Together they affect the Medicare Levy Surcharge, private health insurance rebate tiers, SAPTO, LISTO, HELP repayments and more. The trap most people miss: RESC determines your MLS rate but is excluded from the base the surcharge is actually charged on — a distinction that changes the dollars you pay.

Key takeaways

  • Salary sacrifice doesn't hide income from the tests. RFBA and RESC are added back, so sacrificing can still trigger the MLS, PHI tiers and HELP repayments.
  • Rate ≠ calculation base for MLS. RESC pushes you into a tier, but the surcharge is only charged on taxable income + RFBA.
  • Two different RFBA treatments. For ATI, s57A (hospital/charity) RFBA is multiplied by 0.53; for income-for-surcharge-purposes the full grossed-up amount is used.
  • Spouse income is measured differently per test — combined surcharge income for MLS/PHI, combined rebate income for SAPTO, combined taxable income for the Medicare levy family reduction.
  • NFP packaging is a hidden trap — a nurse on a modest taxable income can still cross the MLS threshold on RFBA alone.

FoundationsWhat RFBA and RESC actually are

Item IT1 · Reportable Fringe Benefits Amount

RFBA — reportable fringe benefits amount

When an employee salary-sacrifices into non-cash benefits (car, health insurance, meals, laptops), those benefits aren't taxable income. But if total taxable value exceeds $2,000 in an FBT year, the employer must report the grossed-up value on the income statement.

Why grossed-up? The RFBA is multiplied by 1.8868 to reflect what the employee would have had to earn pre-tax (at 47%) to buy the same benefit with after-tax dollars. The aim is to stop salary-sacrificing from making people look poorer than they are for income tests.

Example: Car benefit with taxable value $10,000 → RFBA reported = $10,000 × 1.8868 = $18,868. This goes at Item IT1. It is NOT assessable income — but it IS counted in most income tests.

Item IT2 · Reportable Employer Super Contributions

RESC — reportable employer super contributions

The compulsory SG rate (12% from 2026) is not reportable. RESC is only the excess above the compulsory amount — most commonly salary-sacrificed super made by the employer on the employee's instruction.

Why reported? Same logic as RFBA — an employee who salary-sacrifices $20,000 into super reduces taxable income but hasn't actually become $20,000 poorer. RESC adds it back into income tests to level the playing field.

Example: Employee earns $100,000, salary sacrifices $15,000 into super, employer pays SG of $12,000. Only the $15,000 sacrifice is RESC — the $12,000 SG is never reportable.

Critical distinction — affects ATI calculation

RFBA from FBT-exempt employers (s57A) — different treatment for ATI

Hospitals, charities, PBIs and public ambulance services are exempt from FBT, so staff can salary-package large amounts tax-free. But for ATI purposes, RFBA from these employers is used at a reduced rate — the grossed-up amount is multiplied by 0.53.

Standard (taxable) employer · non-s57A

RFBA on income statement: $18,868
Amount used in ATI: $18,868 (full grossed-up)

The full RFBA is added to taxable income when calculating ATI.

FBT-exempt employer (hospital, charity) · s57A

RFBA on income statement: $18,868
Amount used in ATI: $18,868 × 0.53 = $10,000

Only 53% of the RFBA is added to ATI, reflecting the actual pre-FBT benefit value. The ATO makes this adjustment automatically.

Both types are reported at Item IT1 (exempt = Label N, non-exempt = Label W). The ATO handles the ATI adjustment — no manual calculation by the preparer.

Quick referenceEvery income test at a glance

Each card is one income test. The seven chips show which income components feed into it — green = counted, amber = counted at the adjusted rate, grey = excluded, dashed = not applicable. The threshold for 2025–26 sits at the foot of each card.

How to read the chips

The seven components

RFBA
Reportable fringe benefits (IT1)
RESC
Reportable employer super (IT2)
Inv loss
Net financial investment loss
Rent loss
Net rental property loss
Spouse
Spouse income (combined where noted)
D12
Personal super claimed as a deduction
Govt pen.
Tax-free government pensions/benefits

What the colours mean

✓
Counted — included in this test's income
✓*
Adjusted — RFBA ×0.53 for s57A (hospital/charity) employers, ATI tests only
✗
Excluded — not counted
—
N/A — not relevant to this test
Medicare

MLS — determining the rate

Income for surcharge purposes

✓RFBA✓RESC ✓Inv loss✓Rent loss ✓Spouse✓D12 ✓Govt pen.

Spouse tested combined; exempt foreign employment income included.

Threshold 2025–26Single $101k / Family $202k

MLS — calculating the amount

Charged on a narrower base

✓RFBA✗RESC ✗Inv loss✗Rent loss —Spouse✗D12 ✗Govt pen.

The RESC trap: RESC sets the rate but is excluded from the charge.

BaseTaxable income + RFBA only

Medicare levy low-income reduction

Taxable income only

✗RFBA✗RESC ✗Inv loss✗Rent loss ✓Spouse✗D12 ✗Govt pen.

Spouse = combined taxable income for the family threshold.

Threshold 2025–26Single nil ≤$28,011 / Family ≤$47,238
Tax offsets

SAPTO — rebate income

Eligibility & calculation

✓*RFBA✓RESC ✓Inv loss✓Rent loss ✓Spouse✓D12 ✓Govt pen.

Spouse combined (rebate income); exempt pensions included.

ThresholdSingle <$52,759 / Couple <$87,620 combined

Invalid & Invalid Carer Offset (T5)

Taxpayer ATI (or combined)

✓*RFBA✓RESC ✓Inv loss✓Rent loss ✓Spouse✓D12 ✓Govt pen.

Combined ATI for non-spouse dependants.

ThresholdTaxpayer ATI ≤$117,194 (2025)

Invalid & Invalid Carer — dependant ATI

The dependant's own ATI

✓RFBA✓RESC ✓Inv loss✓Rent loss —Spouse✓D12 ✓Govt pen.
ThresholdDependant ATI ≤$13,482 — phases from $282

Zone Tax Offset — dependant ATI (T4)

Child/student ATI for the base

✓RFBA✓RESC ✓Inv loss✓Rent loss —Spouse✓D12 ✓Govt pen.
ThresholdStudent/first child: nil base at $1,786 ATI

ESS $1,000 reduction eligibility

Employee share scheme — Label D

✓RFBA✓RESC ✓Inv loss✓Rent loss ✗Spouse✓D12 ✗Govt pen.
ThresholdAdjusted income ≤$180,000
Private health insurance

PHI rebate tier

Income for surcharge purposes

✓RFBA✓RESC ✓Inv loss✓Rent loss ✓Spouse✓D12 ✓Govt pen.

Spouse combined (family); exempt foreign income included.

Threshold 2025–26≤$101k single / ≤$202k family
Superannuation

Super co-contribution eligibility

Total income threshold

✓RFBA✓RESC ✗Inv loss✗Rent loss ✗Spouse✗D12 ✗Govt pen.

Personal D12 super is deducted, not added back.

Threshold 2025–26Lower $47,488 / Upper $62,488

Spouse Super Offset (T3)

Spouse's income for the offset

✓RFBA✓RESC ✗Inv loss✗Rent loss ✓Spouse✗D12 ✗Govt pen.

Tested on the receiving spouse's assessable income + RFBA + RESC.

ThresholdSpouse income ≤$37k full / ≤$40k nil

LISTO — Low Income Super Tax Offset

ATI of the individual

✓RFBA✓RESC ✓Inv loss✓Rent loss ✗Spouse✓D12 ✓Govt pen.
ThresholdATI ≤$37,000

Division 293 tax

High-income super — own measure

✗RFBA✗RESC ✗Inv loss✗Rent loss ✗Spouse✗D12 ✗Govt pen.

Uses taxable income + concessional contributions instead.

Threshold>$250,000
Government benefits & child support

Family Tax Benefit (FTB) — ATI

Adjusted taxable income

✓*RFBA✓RESC ✓Inv loss✓Rent loss ✓Spouse✓D12 ✓Govt pen.

RFBA ×0.53 for s57A employers; spouse combined.

ThresholdVaries by Part A/B — Centrelink sets

Child support assessment

Lodge return if certain items present

✓RFBA✓RESC ✓Inv loss✗Rent loss ✗Spouse✗D12 ✓Govt pen.
ThresholdLodge unless combined <$29,842 (2025)
HECS / study loan repayments

HELP / HECS repayment income

Repayment income test

✓RFBA✓RESC ✓Inv loss✓Rent loss ✗Spouse✓D12 ✓Govt pen.
Threshold 2025–26Repayment starts at $54,435
✓ = counted · ✓* = counted at adjusted rate (RFBA × 0.53 for s57A exempt employers, ATI tests only) · ✗ = excluded · — = not applicable. MLS rate uses income for surcharge purposes; the MLS calculation base is narrower (taxable income + RFBA only — RESC excluded).

Side by sideThe three key income measures

ATI — adjusted taxable income

ATI

Used for: SAPTO, T5 invalid offset, T4 zone offset, LISTO, FTB, HELP repayments
Components of ATI Taxable income (min $0) + RESC (salary sacrifice super) + Personal super claimed as D12 + Adjusted RFBA total* + Tax-free govt pensions/benefits + Target foreign income + Net financial investment loss + Net rental property loss − Child support paid (IT7) = Adjusted taxable income (ATI)
*Adjusted RFBA = RFBA × 0.53 for s57A exempt employers; full RFBA for all others.

Income for surcharge purposes — MLS & PHI tiers

Income for surcharge purposes

Used for: MLS rate determination, PHI rebate tier allocation
Components Taxable income (excl. FHSS) + RFBA (full grossed-up amount) + RESC + Personal super claimed as D12 + Net financial investment losses + Net rental property losses + Exempt foreign employment income* + Family trust distribution tax base = Income for surcharge purposes
*Exempt foreign employment income only if taxable income is $1+. RFBA is NOT adjusted by 0.53 here — full amount used.

MLS calculation base — different from the rate test

MLS actual calculation base

The rate is set using income for surcharge purposes — but the surcharge is charged on a narrower base
MLS is charged on Taxable income + RFBA (full grossed-up amount) + Family trust distribution tax base = Base for MLS charge
RESC, rental losses and investment losses are added back to set the rate — but the surcharge % is applied only to taxable income + RFBA. So Terry (below) pays 1% on $85,900, not $97,900.

Most confused aspect of MLSRate vs calculation — the RESC trap

RESC gets you into the MLS — but you're not charged on it

The two-step process most people miss

RESC is added to income when determining which MLS tier applies. But the surcharge itself is only charged on taxable income + RFBA. RESC is deliberately excluded from the calculation base.

Terry's example

Terry has: taxable income $72,900 · RFBA $13,000 · RESC $12,000 · no PHI cover · single.

Step 1 — determine the rate

Taxable income$72,900
+ RFBA$13,000
+ RESC$12,000
Income for surcharge purposes$97,900

$97,900 > threshold → 1% rate applies

Step 2 — calculate the surcharge

Taxable income$72,900
+ RFBA$13,000
RESC excluded from calculation base
MLS base$85,900

MLS = $85,900 × 1% = $859

(Not $97,900 × 1% = $979 — RESC is excluded)

Planning insight: Someone who salary-sacrifices $15,000 into super may push their income for surcharge purposes above the threshold and trigger the MLS — but they only pay the 1% on taxable income + RFBA. The RESC pushes them into the tier but isn't itself surcharged. This distinction matters when advising whether salary sacrifice creates an MLS liability.

Combined testsSpouse income — where it matters

Spouse details must be completed wherever relevant

Which measure of spouse income applies, and where

Different tests use different measures of the spouse's income — some use taxable income, some ATI, some income for surcharge purposes. Getting the right measure matters.

MLS — Medicare Levy Surcharge

Combined income for surcharge purposes

For couples, the combined income for surcharge purposes determines whether the family threshold is exceeded. If combined exceeds the family threshold ($202,000 in 2026), both partners pay MLS — even if one is below the single threshold.

Importantly: if one partner has hospital cover but the other doesn't, both still fail. All dependants, including the spouse, must be covered.

SAPTO — Seniors & Pensioners Tax Offset

Combined rebate income (first test)

Step 1 uses combined rebate income to decide if either partner can access SAPTO at all. If combined exceeds $87,620 (together) or $100,104 (apart due to illness), neither is eligible.

Step 2 then uses each partner's individual rebate income for the actual amount. Unused SAPTO from the lower-income partner transfers automatically to the higher-income partner.

Spouse Super Offset (T3)

Spouse's assessable income + RFBA + RESC

The offset phases out on the receiving spouse's assessable income plus their RFBA and RESC — not their ATI.

Full $540 where spouse income ≤$37,000; phases to nil at $40,000. A spouse who sacrifices heavily — low taxable income but high RFBA or RESC — can easily push past $40,000.

Medicare Levy — family reduction

Combined taxable income

The family Medicare levy low-income reduction uses combined taxable income (not ATI). Enter spouse taxable income in the spouse details section. This lets the family threshold ($47,238 nil threshold, 2025–26) apply where combined family income is low.

PHI rebate tier

Combined income for surcharge purposes

Assessed on the family's combined income for surcharge purposes (same as MLS) where one partner is a spouse on 30 June. Family threshold is $202,000 base (2026) + $1,500 per additional child after the first.

Someone married most of the year but separated on 28 June is assessed as single at 30 June — individual tier, not family.

Invalid & Invalid Carer Offset (T5)

Combined ATI (for non-spouse dependants)

Where the claim is for a dependant other than a spouse (parent, child), the combined ATI of taxpayer and spouse must not exceed $117,194.

Where the claim is for the spouse as the invalid, it's the taxpayer's ATI alone that must not exceed $117,194 — the invalid spouse's own income doesn't count toward the limit.

Hospitals · charities · PBIsThe s57A exempt-employer trap

Why NFP employees get caught despite low taxable income

Big RFBA, low taxable income — and over the threshold anyway

Employees at hospitals, charities and PBIs can salary-package $15,900–$30,000 free of FBT. Taxable income looks low — but RFBA is large, and it drags them into income tests they don't realise they've crossed.

Example — hospital nurse Sarah

Sarah is a nurse at a public hospital. She packages $15,900 in mortgage repayments and $2,549 meals & entertainment (total taxable value ~$18,449). Her employer is s57A exempt.

Taxable income$65,000She thinks this is her income
RFBA (grossed-up)$34,809$18,449 × 1.8868
Income for surcharge purposes$99,809Crosses the threshold → 1% MLS

Sarah believes she earns $65,000 and shouldn't pay the MLS. But her RFBA pushes income for surcharge purposes toward the 2026 single threshold ($101,000). She must either get hospital cover or pay MLS. Many nurses and social workers are caught by this every year — they don't realise packaging has an income-test consequence.

ATI vs surcharge: For ATI (SAPTO, T5, LISTO), Sarah's RFBA is adjusted: $34,809 × 0.53 = $18,449. So her ATI is $65,000 + $18,449 = $83,449 — lower than her surcharge income. The 0.53 adjustment applies to ATI only, NOT to income for surcharge purposes or the MLS calculation base.

Adviser playbookTax planning strategies

🎯 Strategy 1 — Check surcharge income before recommending salary sacrifice

When a client's taxable income is just under the MLS threshold (under $101,000 for 2026), salary sacrifice into super increases RESC — which pushes income for surcharge purposes above the threshold even though taxable income dropped. Model the net position: tax saved vs MLS triggered. A $10,000 sacrifice might save $3,700 in income tax but cost $1,010 in new MLS — net benefit $2,690, not $3,700.

🎯 Strategy 2 — Salary sacrifice can destroy a retiree's SAPTO

A self-funded retiree with some employment income might sacrifice into super to cut taxable income — but RESC is added back into rebate income for SAPTO. That can push rebate income above the lower threshold and reduce SAPTO by 12.5 cents per dollar. For lower-income retirees, the sacrifice's tax saving may be entirely offset by the SAPTO reduction.

🎯 Strategy 3 — Spouse contributions: watch the receiving spouse's RFBA and RESC

The spouse super offset (T3) phases out where the receiving spouse's assessable income + RFBA + RESC exceeds $37,000. A spouse with $30,000 taxable income but $12,000 RESC has combined income of $42,000 — the offset is completely gone. Always check RFBA and RESC, not just taxable income, before advising on spouse contributions.

🎯 Strategy 4 — NFP employees and the PHI decision

Hospital workers, charity staff and social workers who package heavily often find income for surcharge purposes exceeds the MLS threshold despite modest taxable income. For these clients, private hospital cover is almost always worth it — the MLS cost (1%+ of surcharge income) exceeds basic hospital cover. The earlier in the FY it's arranged, the fewer days of MLS liability.

🎯 Strategy 5 — HELP repayments include RFBA and RESC too

Young professionals with HELP debts who sacrifice heavily or receive FBT benefits can be caught by repayments even when take-home pay feels modest. Repayment income includes RFBA and RESC, so $60,000 taxable + $15,000 RESC + $10,000 RFBA = $85,000 repayment income, attracting a HELP rate of 5.5% on the total. Calculate the true repayment before recommending sacrifice structures for clients with student debt.

FAQFrequently asked questions

Does salary sacrifice into super reduce my Medicare Levy Surcharge?

Not necessarily. Salary sacrifice reduces taxable income, but the contributions appear as RESC, which is added back into income for surcharge purposes — the measure that determines MLS liability and tier. If RESC pushes that total above the single threshold ($101,000 in 2026), MLS still applies. The surcharge is then only charged on taxable income plus RFBA — RESC is excluded from the calculation base. Always model both steps: whether MLS is triggered, and what it's actually charged on.

Why does hospital salary packaging still trigger the Medicare Levy Surcharge?

Because for income for surcharge purposes (MLS and PHI tiers), the full grossed-up RFBA is used regardless of whether the employer is FBT-exempt under s57A. The 0.53 reduction only applies when calculating ATI (used for SAPTO, T5, LISTO and FTB). For MLS and PHI, the full RFBA counts. A nurse with $65,000 taxable income and $34,809 RFBA has income for surcharge purposes of $99,809 — near or above the threshold.

What is the difference between ATI and income for surcharge purposes?

Both add RFBA and RESC back to taxable income, but they differ two ways. For ATI, RFBA from s57A exempt employers is multiplied by 0.53 first; for income for surcharge purposes, the full amount is used. ATI also adds tax-free government pensions and target foreign income, while income for surcharge purposes adds exempt foreign employment income. ATI is used for SAPTO, T5 and LISTO; income for surcharge purposes is used for MLS and PHI rebate tiers.

Is my spouse's income included in my income for tax purposes?

Spouse income is never added to your taxable income. But for specific tests it's assessed combined: MLS and PHI use combined income for surcharge purposes; SAPTO uses combined rebate income (eligibility) then individual (calculation); the Medicare levy family reduction uses combined taxable income. The measure of spouse income differs by test — using the wrong one leads to errors in the return.

Does RESC affect my HELP or HECS repayments?

Yes. HELP repayment income includes both RFBA and RESC. Salary-sacrificing $15,000 into super reduces taxable income by $15,000 but adds $15,000 of RESC to repayment income. Depending on where that lands relative to the thresholds, the sacrifice may increase HELP repayments — potentially cancelling part of the income-tax saving.

How does the spouse super offset (T3) income test work?

The offset phases out on the receiving spouse's assessable income plus their RFBA and RESC — not their full ATI. The full $540 applies where that combined figure is $37,000 or less. It reduces dollar-for-dollar above $37,000 and disappears at $40,000. A spouse with $30,000 taxable income but $12,000 RESC has combined income of $42,000 — the offset is gone, even though taxable income alone would have qualified.

Disclaimer

General information only — not tax, financial or legal advice. Income-test thresholds are updated annually by the ATO; figures here are based on 2025–26 rates unless stated. Verify current figures at ato.gov.au or consult a registered tax agent for advice specific to your circumstances.

RFBA, RESC & Spouse Income Tests — FY 2025–26 · Sources: ITAA 1997, FBTAA 1986, ATO guidance

RFBA at Item IT1 · RESC at Item IT2 · s57A adjustment: RFBA × 0.53 for ATI only · MLS rate ≠ MLS calculation base

For adviser reference — verify all figures against current ATO guidance before lodgement.

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