An end to Low and Middle-Income Tax Offset (LMITO)
With the financial year end approaching, you may be curious on how much tax offset you will be
eligible for in 2023 financial year. Well, unfortunately millions of Australians are about to feel one of
the biggest tax increases in history due to a super-sized tax offset becoming no longer available!
Financial year 2022 was the final year LMITO was claimable, so when you have your 2023 tax done
your taxable income will be higher leading to more tax payable.
The $11 billion LMITO was introduced by the former Coalition government and was designed to be
only accessible in the 2018-2019 financial year. However, due to the pandemic, the offset was
extended three times. The offset was even increased by $420 for the 2021-2022 financial year
(increasing the base amount to $675 and maximum to $1,500) as part of 2022-2023 federal budget
announcements.
So what are the effects?
Before: With LMITO
The amount of offset you receive depends on your taxable income and the amount of tax you have
paid during the financial year. It can only reduce the tax you pay to $0, any unused offset is
non-refundable to you.
|
Taxable Income |
Tax Offset |
|
$37,000 or less |
$675 |
|
From 37,001 to $48,000 |
$675 plus 7.5 cents for every $ above $37,000 (max $1,500) |
|
From $48,001 to $90,000 |
$1,500 |
|
From $90,001 to $126,000* |
$1,500 less 3 cents for every $ above $90,000 |
If you are earning $126,000 or more, you do not receive the LMITO.
After: With no LMITO
The government’s plan not to extend LMITO will mean individuals earning under $126,000 a year will
no longer have up to $1,500 reduced from their tax payable and will be ultimately paying more tax
than they have in prior years. For someone with a taxable income of $50,000, this will mean a 3% tax
rise.
The end of LMITO highlights how the tax plan of the previous government was in fact for the benefit
of high-income earners who would gain a massive and permanent tax cut whilst it only provides a
temporary relief for low and middle-income earners.
Author
May Aung
