Forgotten $700 tax offset millions of Aussies can claim

The low-income tax offset isn’t going anywhere and millions will still benefit.

·2-min read
Australian ATO tax return forms and a man holding Aussie $50 notes
Millions of Aussie workers could benefit from this $700 tax offset. (Source: Getty)

While the popular $1,500 low to middle-income tax offset (LMITO) will not be extended for this tax season, millions of Aussie workers will still benefit from a $700 offset.

The low-income tax offset (LITO) isn’t going anywhere and pays out $700 to anyone earning $37,000 or less. However, the way the offset works means that even those earning up to $66,000 could see still a benefit - albeit minor.

So, how does it work?

Anyone earning up to $37,000 a year will receive the full $700 offset. From there on, the offset slides down gradually.

The amount you are eligible to receive reduces by 5 cents for every dollar earned over $37,500, and then by 1.5 cents for every dollar over $45,000.

This means that someone earning $66,000 would get back a couple of bucks from the offset come tax time.

And with the median wage in Australia coming in at around $65,000 a year, millions could be set to see a benefit.

The LITO allows working Aussies to earn up to $21,884 for the 2022–23 financial year before they need to pay any income tax or Medicare Levy.

It should be noted that the LITO is not a tax refund. It can only be used to lower the amount of tax you owe. This means it can’t be received as a tax refund or used to pay the Medicare levy.

What’s the difference between the LITO and LMITO?

The LMITO was a temporary tax offset brought in between July 1, 2018 and June 30, 2022.

It gave workers earning less than $126,000 a year $1,500 in tax rebates. This meant that a two-person household could have received up to $3,000 in tax cuts.

It paid low to middle-income earners back the tax they’d already paid.

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