With the Low and Middle-Income Tax Offset gone,
we’ll feel the pinch this tax season.
If you are a low or middle-income earner (i.e. taxable income below $126,000), please be reminded that the low and middle-income tax offset (LMITO) has ended on 30 June 2022, which will impact your upcoming tax returns for the 2022-23 financial year. Without this offset, your tax bill will be higher this year, so expect a higher tax liability or a much lower tax refund during tax time.
The Low and Middle-Income Tax Offset (LMITO) was in effect for the past four financial years, and in the 2022-23 federal budget, it received an increase of $420 for the 2021-22 income year, which was known as the one-off $420 cost of living tax offset. However, the Treasurer has confirmed that this tax offset will no longer continue, effectively increasing the tax burden for over 10 million middle-income Australians. This comes at a bad time as many face increased cost-of-living pressures, including increased mortgage rates or rent, among other increased expenses.
What is the LMITO?
The low and middle income tax offset is not a cash refund. Rather, as with any tax offset, it is an amount to reduce the amount of tax you need to pay on your taxable income.
The table below shows the amount of the offset you can receive for the previous financial year (2021-22), depending on your taxable income.
| Taxable Income | Offset Amount |
|---|---|
| $37,000 or less | $675 |
| From $37,001 to $48,000 | $675 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,500 |
| From $48,001 to $90,000 | $1,500 |
| From $90,001 to $126,000* | $1,500 minus 3 cents for every dollar of the amount above $90,000 |
*Note: If your taxable income is $126,000 or more, you will not receive the LMITO.
For more information about the LMITO, please visit the ATO:
https://www.ato.gov.au/Individuals/Income-and-deductions/Offsets-and-rebates/Low-and-middle-income-earner-tax-offsets/#Lowandmiddleincometaxoffset
Should you require any additional assistance please don’t hesitate to contact us.