Next year’s tax return may look slightly different to previous years for low and middle-income earners, with Ending the Low-Middle Income Tax Offset (LMITO).
It has been confirmed that the 2021-22 income year will be the final year for the LMITO to be applied to returns, and it will not be available for future income years.
How Did The LMITO Work?
Ending LMITO acts as an offset, meaning that it reduces the tax you pay (known as your tax payable) on your taxable income. Your taxable income is your total income minus any deductions you claim.
In your 2021-22 tax return, nothing additional needed to be completed for you to receive the low and middle-income tax offset. If your taxable income is $18,201 or more, the Australian Taxation Office works out how much tax you need to pay based on what you have earned.
The low and middle-income tax offset is not a cash refund. If you didn’t pay any tax during the year, you wouldn’t get the low and middle-income tax offset.
Offsets are not used to reduce your Medicare levy & Medicare levy surcharge (if there is any). The LMITO did not affect this part of your tax return.
Ending LMITO, what this means for you?
While the LMITO will not be available for the 2022-23 income year, the Low Income Tax Offset (LITO) may still be available (pending any further rulings or changes). This will automatically applied by the ATO after you lodge your tax return next year.
The amount of the low-income tax offset (LITO) you receive will depend on your taxable income.
If your taxable income is:
- $37,500 or less, you will get the maximum offset of $700
- between $37,501 and $45,000, you will get $700 minus 5 cents for every $1 above $37,500
- between $45,001 and $66,667, you will get $325 minus 1.5 cents for every $1 above $45,000.
Consulting with a tax agent or professional like us can be of great assistance for tax returns and preparation for the coming year, particularly regarding any offsets or deductions you may be eligible for. Why not start a conversation with us today?
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More details on the LMITO