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Tax Issues: Low and Middle Income Tax Offset

Tax Issues: Low and Middle Income Tax Offset

Written by: 
Evan Lowenstein

As part of the Morrison re-election promise and originally introduced in the 19/20 Budget, millions of Australians may be entitled to a new offset that is effectively equivalent to a tax rebate of up to $1080.

The Low and Middle Income Tax Offset (LMITO) helps low and middle income earners lower the amount of tax they need to pay. Because it is a tax offset, it can only be used to lower the amount of tax that you owe and not to generate a tax refund or pay your Medicare Levy.

To be eligible for this offset, your taxable income has to be at or below $125,333. You don’t have to apply for LMITO, the ATO will work out if you’re eligible when they assess your tax return.

There was initially quite some confusion as the parliament hadn’t actually passed the law by the time people were already doing their tax returns for the 18/19 year.

The ATO outlined their position by saying they would hold peoples’ refunds until the measure was passed by both houses.

This measure has now been passed and the ATO have announced that a record number of taxpayers have already lodged their returns compared with the same time last year in order to get the rebate.

The tax table is as follows:

Taxpayers with a taxable income:

  • of $37,000 or below can now receive a low and middle income tax offset of up to $255
  • Above $37,000 and below $48,000 can now receive $255, plus an amount equal to 7.5% to the maximum offset of $1,080
  • Above $48,000 and below $90,000 are now eligible for the maximum low and middle income tax offset of $1,080
  • above $90,000 but is no more than $126,000 are now eligible for a low and middle income tax offset of $1,080, less an amount equal to three per cent of the excess.
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