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  • Low and middle income earner tax offsets

    Check if you're eligible for the low income tax offset (LITO) and the low and middle income tax offset (LMITO).

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    Eligibility for the tax offsets

    Eligible low and middle income earners may receive one or both of the:

    • low income tax offset (LITO)
    • low and middle income tax offset (LMITO).

    These offsets can only reduce your tax payable to zero, it is not a bonus payment. The amount of available offset depends on your individual circumstances.

    To be eligible for one or both of these tax offsets you need to:

    • be an Australian resident for income tax purposes
    • pay tax on your taxable income
    • have a taxable income that is below certain income thresholds.

    You don't need to complete a section in your tax return to get these tax offsets, we work out the offsets when you lodge your tax return.

    If you are eligible, the amount of offset you're entitled to reduces the tax you need to pay when you lodge your tax return. You can see the amount of offset you receive on your notice of assessment (you won't receive the offset as a separate payment).

    Low income tax offset

    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.

    Low and middle income tax offset

    In addition to the LITO, you may also receive the low and middle income tax offset (LMITO).

    If your taxable income is less than $126,000 and you are an Australian resident for tax purposes, you will get some or all of the LMITO.

    As announced in the 2022–23 federal Budget, the LMITO has been increased by $420 (referred to as the one-off $420 cost of living tax offset) for the 2021–22 income year. This increases the base amount to $675 and the full amount to $1,500.

    The LMITO amount for the 2018–19, 2019–20 and 2020–21 income years remains the same at between $255 and $1,080.

    The amount of offset you receive depends on your circumstances, such as your taxable income and how much tax you have paid throughout the income year – see, what is a tax offset?

    Media: Low and middle income tax offset explained
    http://tv.ato.gov.au/ato-tv/media?v=bi9or7odo6jxb8External Link (Duration: 01:05)

    The 2021–22 income year is the last year for the LMITO – it will not be available in future income years.

    The tables below show the amount of the offset you can receive depending on the income year and your taxable income.

    Low and middle income tax offset for 2021–22 income year

    Taxable income

    Offset

    $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.

    Low and middle income tax offset for 2018–19, 2019–20 and 2020–21 income years

    Taxable income

    Offset

    $37,000 or less

    $255

    From $37,001 to $48,000

    $255 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,080

    From $48,001 to $90,000

    $1,080

    From $90,001 to $126,000*

    $1,080 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.

    Example: taxable income up to $37,000

    Jacqueline's taxable income for 2021–22 income year is $18,000. She paid no tax because her income is under the tax-free threshold.

    As Jacqueline's income was less than $37,000, she is eligible for the:

    • low and middle income tax offset amount of $675
    • low income tax offset amount of $700.

    Jacqueline is eligible for both offsets but as she didn't pay any tax, her tax payable can't be reduced any lower than $0.

    The low and middle income tax offset and low income tax offset are non-refundable tax offsets so the unused offset can't be refunded. Jacqueline's tax payable remains at $0 and she doesn't receive a tax refund.

    End of example

     

    Example: taxable income exceeds $37,000 but is not more than $48,000

    Jeff's taxable income is $45,000 for the 2021–22 income year. He is eligible for both the low income tax offset and the low and middle income tax offset.

    As Jeff's income exceeds $37,000 but is not more than $45,000, he is eligible for a low income tax offset amount of $700 minus 5 cents for every dollar his income is above $37,500.

    That is:

    $45,000 − $37,500 = $7,500

    $7,500 × $0.05 = $375

    $700 − $375 = $325

    As Jeff's income is between $37,000 and $48,000, he is also eligible for a low and middle income tax offset amount of $675 plus 7.5 cents for every dollar his income is above $37,000.

    That is:

    $45,000 − $37,000 = $8,000

    $0.075 × $8,000 = $600

    $675 + $600 = $1,275

    Both of the offset amounts reduce Jeff's tax payable.

    $325 + $1,275 = $1,600

    Jeff's tax payable of $5,092 can be reduced by up to $1,600 using both the LITO and LMITO.

    End of example

     

    Example: taxable income exceeds $48,000 but is not more than $90,000

    Anita's taxable income is $70,000 for the 2021–22 income year. As Anita's income is more than $48,000 but less than $90,000, she is eligible for a low and middle income tax offset of $1,500.

    Anita is not eligible for the LITO as her income is above $66,667.

    Anita's tax payable of $13,217 can be reduced by up to $1,500 using the LMITO.

    End of example

     

    Example: taxable income exceeds $90,000 but is not more than $126,000

    Andre's taxable income is $92,000 for the 2021–22 income year. Andre's income is more than $90,000 but less than $126,000. Andre is eligible for a LMITO amount of $1,500 minus 3 cents for every dollar his income is above $90,000.

    That is:

    $92,000 − $90,000 = $2,000

    $0.03 × $2,000 = $60

    $1,500 − $60 = $1,440

    Andre's tax payable of $20,367 can be reduced by up to $1,440 using the LMITO.

    Andre was not eligible for the LITO as his income was above $66,667.

    End of example

    What is a tax offset?

    A tax offset 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.

    The LITO and the LMITO can only reduce the tax you pay to $0 (zero). Any offset amount that remains once your tax payable is zero isn't refunded to you.

    Media: How tax offsets work
    https://tv.ato.gov.au/ato-tv/media?v=bi9or7od1ih49oExternal Link (Duration: 01:41)

    How tax offsets affect the tax you pay

    The tax offset amount you receive depends on your taxable income and the amount of tax you need to pay on this income (your tax payable).

    Offsets can't reduce your Medicare levy and Medicare levy surcharge (if any). The Medicare levy is 2% of your taxable income, in addition to the tax you pay on your taxable income.

    If your taxable income is $18,200 or less and you:

    • have not paid any tax, an offset can't reduce the tax you pay – your tax payable amount is already zero
    • have paid any tax on this income, you will generally receive all of this tax back as a refund – your tax payable amount is zero so, no offset applies.

    If your taxable income is $18,201 or more, we use your taxable income to work out how much tax you're required to pay. We then reduce the tax you need to pay with the offset amount you're entitled to.

    If you are under 18 years old on 30 June of the income year and you have unearned income, these offsets can't reduce the tax payable on this income.

    Claiming income tax offsets

    You don't need to complete anything in your tax return in order for us to work out your low income tax offset or the low and middle income tax offset. We work out the amounts of these tax offsets for you once you lodge your tax return.

    Any offset you are entitled to is included when we work out the result of your tax return.

    If you want to find out how much of an offset you were entitled to, you can see this amount on your notice of assessment. Look for the Less non-refundable tax offsets section.

    If you lodge online, your notice of assessment will be sent to your myGov Inbox once your return has been finalised.

    If you receive a tax refund it will be deposited into your nominated bank account. Any refund may also be reduced by any debt you have with us or any Australian government agency. The law requires us to use refunds or credits to pay debt.

    Authorised by the Australian Government, Canberra.  

    Last modified: 01 Aug 2022QC 31944