Am I eligible for the newly expanded Low and Middle Income Tax Offset?

Back in March, the low and middle-income tax offset was extended for financial year 2022 only in the Federal budget, so that people earning up to $126,000 will get an additional rebate of $420 in excess of what they would have received through the existing scheme. In simple terms the new LMITO increased from $1,080 to $1,500.

The Low and Middle Income Tax Offset (LMITO)

This is non-refundable and cannot be carried forward or transferred and will not be available after the 2021-22 income year. This means that we can use the offset to minimise your current tax bill to zero and any remaining balance will be lost.

This is how the LMITO rates are calculated when your taxable income is:

• less than $37,000 you will pay $675 less tax
• between $37,001 and $48,000 the tax offset is $675 plus 7.5 cents for each dollar over $37,000
• between $48,001 to $90,000 you will pay $1,500 less tax
• between $90,001 to $126,000, the tax offset is $1,500 less 3 cents for each dollar over $90,000.

The government estimates that 4.5 million Australian taxpayers will be eligible for the full LMITO of $1,500, with another 5.6 million will receive a partial LMITO.

Low Income Tax Offset (LITO)

The LITO is targeted at people with low incomes (up to $66,667) and will continue to apply in addition to LMITO.

The LITO rate is calculated when your taxable income is:

• $37,500 or less - $700
• $37,501 - $45,000 - $700 less 5% of the portion of your taxable income that exceeds $37,000
• $45,001 - $66,667 - $325 less 1.5% of the portion of your taxable income that exceeds $45.000

How we can help

In order to get the LMITO and LITO you need to lodge a tax return for 2021-22. Offsets are then calculated by your TaxAssist Accountant and sent to ATO for confirmation. The ATO will start to issue money to taxpayers from 1 July 2022.

If you need any help or advice with the financial aspects of running your business, please contact TaxAssist Accountants on 03 8594 1811 or complete our contact form.

Date published 19 May 2022 | Last updated 9 Jul 2022

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.