As many Australians will be aware, the Low and Middle Income Tax Offset (LMITO) ended on 30 June 2022. Unfortunately, the 2023 Budget announced no extension of the LMITO beyond the 2021-2022 income year. This development may leave a considerable number of taxpayers wondering what impact this change will have on their future tax refunds. With the professional guidance of this blog, you can navigate these changes and potentially recuperate some of these losses on your tax return.
LMITO's Sunset and Its Effect
Without an extension of the LMITO, low-to-middle income earners may see their tax refunds from July 2023 reduced by between $675 and $1,500. This applies to those earning up to $90,000 annually but phasing out for those earning up to $126,000. However, all is not lost. Despite the cessation of the LMITO, low and middle income taxpayers still have access to the Low Income Tax Offset (LITO).
The Persistence of LITO
The Low Income Tax Offset (LITO) is an enduring feature of the Australian tax system designed to reduce the tax burden on lower-income earners. Unchanged in the 2023 Budget, LITO remains a viable means of easing the tax burden for eligible earners. The maximum amount for LITO is $700, reducing at rates determined by your taxable income bracket. To be specific:
If your taxable income is between $0 and $37,500, the offset amount is $700.
If your taxable income is between $37,501 and $45,000, the offset amount is calculated as $700 - ((Taxable Income - $37,500) x 5%).
If your taxable income is between $45,001 and $66,667, the offset amount is calculated as $325 - ((Taxable Income - $45,000) x 1.5%).
If your taxable income exceeds $66,668, there's no offset.
How We Can Help
Understanding and claiming all available deductions can be an intricate process, which is where our expertise comes in. From employment-related expenses to investment-related deductions, we will conduct an full review of your financial situation to identify all possible areas for claims. We don't leave any stone unturned to ensure you pay no more tax than necessary.
While the end of the LMITO may present new challenges, it's not the end of the road for tax savings. Contact Spence Financial Management today to book your tax return appointment or to seek advice on how to navigate these changes.
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