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Low and Middle Income Tax Offset

Low and Middle Income Tax Offset

On Tuesday 25th October 2022, the Treasurer delivered the Federal Budget in which there was no announcement to any extension of the Low and Middle Income Tax Offset (LMITO) for the 2023 financial year.

For the 2022 financial year, Australian workers earning between $37,000 – $126,000 may have been eligible for the LMITO of up to $1,500 depending on their income level, however this has now ceased and has been fully replaced by the Low Income Tax Offset (LITO).

As a result, low to middle income earners may see their tax refunds for the 2023 financial year and beyond reduce by between $675 and $1,500.

No changes were made to the low income tax offset (LITO) in the recent Federal budget and the LITO will continue to apply for the 2023 and future income years. The LITO was initially brought forward in the 2020 Budget to apply from the 2021 income year, and was always intended to replace the LMITO.

Referring to the below table, the maximum LITO amount is $700 and is reduced by a rate of 5 cents per dollar between taxable incomes of $37,500 – $45,000, and then at a rate of 1.5 cents per dollar for taxable incomes between $45,000 and $66,667.

Taxable Income Offset Amount
$0 – $37,500 $700
$37,501 – $45,000 $700 – ((Taxable Income – $37,500) x 5%)
$45,001 – $66,667 $325 – ((Taxable Income – $45,000) x 1.5%)
$66,668 + Nil

Contributed by Tim Heuston.


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