So, what changed?

From 1 July 2018

A low and middle income tax offset (LMITO), first introduced in the 2018-19 Federal Budget, provides a tax benefit to those with taxable incomes below $125,333. Recent changes increase the LMITO from a maximum of $530 to $1,080 and the base amount from $200 to $255, and make it applicable to a greater number of taxpayers by increasing the threshold from $125,333 to $126,000.

The first thing to remember is that this is a tax offset; it reduces tax you already owe. It is not a cash back – a point the ATO is at pains to point out stating on its website that, “It doesn’t mean that you will get an extra $1,080 in your tax return.”

The offset applies for a limited time. In this case, the offset applies to the 2018-19, 2019-20, 2020-21 and 2021-22 income years. So, if you are eligible to receive the offset, it applies to the taxable income you earned last financial year (2018-19) and you will receive it once you have lodged your tax return.

 

Taxable Income* Offset minimum Offset maximum
<$37,000 $255 $255
>$37,000 – <$48,000** $255 $1,080
>$48,000 – <$90,000 $1,080
>$90,000 – <$126,000*** $1,080
$126,000+ $0 $0

 

* Your taxable income is the income you earn less any deductions you claim – not your salary.

** offset entitlement is $255, plus 7.5% of the excess to a maximum of $1,080.

*** offset entitlement is $1,080, less 3% of the excess on taxable income above $90,000.

So, to put it simply, the $1,080 is a maximum amount. Most taxpayers will get less than this. For 2018/19, as an example, if you earned:

  • Less than $21,885, while you have an entitlement to LMITO of $255, you do not pay personal income tax and therefore cannot utilise the offset. So you get NIL.
  • $45,000, you will receive a tax reduction of $855 ($255 plus 7.5% on every dollar between $37,000 and $45,000).
  • $85,000, you will receive a tax reduction of $1,080.