With the Low and Middle-Income Tax Offset gone, prepare for lower tax refunds or higher tax bills
If your taxable income is below $126,000, please be aware that the Low and Middle-Income Tax Offset (LMITO) has ended on 30 June 2022, which will impact your tax returns for the 2022-23 financial year. This means that without the offset, your tax bill will be higher this year, resulting in either a higher tax liability or a lower tax refund during tax time.
Although the LMITO received a boost by $420 for the 2021-22 income year, referred to as the one-off $420 cost of living tax offset, the Treasurer has confirmed that it will no longer continue for the 2022-23 income year. Unfortunately, this change affects over 10 million middle-income Australians and increases their tax burden, especially during a time when many are facing rising living expenses such as mortgage rates, rent, and other expenses.
So What is the LMITO?
As with any tax offsets, the LMITO is not a cash refund but rather an amount that reduces the amount of tax you need to pay on your taxable income. Please refer to the table below to determine the amount of offset you could have received for the previous financial year (2021-22), based on your taxable income. Keep in mind that this offset amount will not be applied to your current year’s (2022-23) tax obligation as it no longer exists.
| Taxable Income | Offset Amount |
|---|---|
| $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.
For more information about the LMITO, please visit the ATO:
https://www.ato.gov.au/Individuals/Income-and-deductions/Offsets-and-rebates/Low-and-middle-income-earner-tax-offsets/#Lowandmiddleincometaxoffset
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