Yahoo Finance Forgotten $700 tax offset millions of Aussies can claim
The low-income tax offset isn’t going anywhere and millions will still benefit.
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.
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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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