The Low and Middle Income Tax Offset (LMITO) — which provided tax relief of up to $1,500 to Australian taxpayers earning between $18,200 and $126,000 — ended permanently after the 2021-22 income year. It was not extended beyond 30 June 2022. In 2026, the LMITO no longer exists, and the government replaced some of its benefits with the Stage 3 tax cuts (effective from 1 July 2024). Here is what the end of LMITO means for your tax position.
What Was LMITO?
The Low and Middle Income Tax Offset (LMITO) was a temporary non-refundable tax offset introduced in 2018-19 for individuals with taxable incomes up to $126,000. At its peak ($1,500 maximum), LMITO provided significant relief to middle-income earners. It was not a cash payment — it reduced the amount of income tax you owed. If your tax liability was less than the LMITO amount, you received a refund equivalent to your tax liability (not more).
LMITO Ended After 2021-22
The 2021-22 return (lodged in 2022) was the last return in which LMITO could be claimed. The offset was not available in 2022-23, 2023-24, 2024-25, or 2025-26. Many taxpayers who received a large refund in 2022 and expected a similar outcome in 2023 were surprised to receive a lower refund or a tax bill — the LMITO accounted for the difference.
What Replaced LMITO? Stage 3 Tax Cuts
The Stage 3 tax cuts (revised by the Albanese Government in early 2024 and effective from 1 July 2024) changed the individual income tax brackets:
- Tax-free threshold: Remains at $18,200
- 19% rate: Now applies from $18,201 to $45,000 (was up to $37,000 before)
- 32.5% rate: Now applies from $45,001 to $135,000 (was up to $120,000 before)
- 37% rate: Now applies from $135,001 to $190,000
- 45% rate: Applies above $190,000
These changes provided permanent tax relief to most Australians — particularly those earning $45,000-$135,000 — through lower marginal rates rather than a temporary offset.
Low Income Tax Offset (LITO) Still Applies
The Low Income Tax Offset (LITO — without the "M") still applies in 2026. LITO provides up to $700 for taxpayers with income under $37,500, phasing out to zero at $66,667. This is separate from LMITO and continues to benefit lower-income earners.
Frequently Asked Questions
Why is my tax refund smaller than last year?
If your refund is smaller than in 2021-22, LMITO is almost certainly part of the explanation. The offset provided up to $1,500 in 2021-22 and has been absent since. Stage 3 tax cuts (2024-25 onwards) have partially offset this for many earners, but the timing difference means 2022-23 and 2023-24 refunds were reduced. Also check whether your deductions have changed, your income has increased (pushing you into a higher withholding bracket), or your Medicare Levy Surcharge status has changed.
Is LMITO coming back?
There are no government announcements as of 2026 indicating LMITO will be reinstated. The Stage 3 tax cuts replaced it as the government's mechanism for individual income tax relief. Any future cost-of-living assistance from the federal government is more likely to take the form of targeted payments or changes to existing offsets rather than a reinstated LMITO.
Want to understand how the 2026 tax rates and offsets apply to your specific situation? Contact AWTS — we prepare returns that correctly apply all available offsets and credits.
