What guideline does the Green Book provide regarding offsets?

The Green Book outlines that offsets, also known as tax offsets or tax credits, serve the primary function of reducing the tax payable by an entity or individual. This reduction occurs because offsets are designed to lower the amount of tax owed, effectively decreasing the taxpayer's overall tax liability. For instance, if a taxpayer has a tax liability of $1,000 but qualifies for a $200 offset, their final tax payable would be reduced to $800.

This mechanism allows the government to incentivize certain behaviors or support specific industries by providing monetary relief, which is crucial for the taxpayer’s financial scenario. It is important to recognize that while offsets decrease the amount of tax that needs to be paid, they do not impact the total income or total tax liability figure in terms of how much income is taxed or how tax liability is calculated before any offsets are applied.

In contrast, the other options suggest either an increase in tax liabilities or limit the applicability of offsets, which does not align with the core purpose of offsets as described in the Green Book.