How millions of Aussies can access a $700 tax offset

The LMITO may be gone, but there is still another tax offset many Aussies can claim. (Source: Getty)

We are bidding farewell to the $1,500 low and middle income tax offset (LMITO) this financial year. But there’s still another tax break many Aussies can claim.

The low income tax offset (LITO) will continue to apply this tax time. It allows lower-income Aussies to receive a tax offset of up to $700 and reduce the amount of tax they need to pay.

Here’s how it works.

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What is the LITO?

The LITO applies to taxpayers earning up to $66,667 for the 2022-23 financial year. The amount you get depends on your taxable income for the year.

If you earn $37,500 or less, you will be eligible for the maximum offset of $700.

If you earn between $37,501 and $45,000, you will receive $700 minus 5 cents for every $1 above $37,500. So, someone earning $45,000 would receive a $325 tax offset.

If you earn between $45,001 and $66,667, you will receive $325 minus 1.5 cents for every $1 above $45,000.

That means someone earning the median income of $50,980 stands to get a $235.30 tax offset.

How can I claim it?

You don’t need to do anything to claim the low income tax offset, except lodge your tax return. The Australian Taxation Office says it will work out the offset after you lodge.

The tax offset will reduce the amount of tax you need to pay. It is not a separate payment and any unused offset cannot be refunded.

What happened to the LMITO?

The LMITO was a temporary tax offset. It ended on June 30, 2022 and is no longer available for the current financial year.

Nicknamed the “lamington”, it previously gave people earning up to $126,000 per year a tax break of up to $1,500, depending on their taxable income.

The offset was first introduced in the 2018-19 financial year, extended during the pandemic, and then increased for the 2021-22 financial year from a maximum of $1,080 to $1,500.

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