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Tax 2022: What is the LMITO and how do you access it?

·2-min read
Composite image showing pedestrians eligible for the LMITO crossing the street in the rain and money.
About 10 million Aussies are eligible for the LMITO. (Source: Getty)

The 2021-2022 financial year is the last time taxpayers will enjoy additional tax relief through the low and middle income tax offset (LMITO).

Fondly known as the ‘lamington’ offset, Aussies have saved an extra $1,080 each year for the past two years, thanks to this tax-relief mechanism.

It was never meant to be a permanent fixture, but has been extended three times to help the economy recover post-COVID and more recently to help ease cost-of-living pressures.

The former Coalition government actually decided to boost the LMITO in the most recent Federal Budget, increasing the offset to a maximum of $1,500.

This amounts to an extra $420 worth of tax relief for around 10 million Aussies with taxable incomes below $126,000.

How to get the LMITO

According to the Australian Taxation Office, you don’t need to do anything extra to get any tax relief you’re entitled to.

The tax office will calculate any tax offset you are eligible for when you lodge your 2022 income tax return.

Why the LMITO is winding down

The LMITO tax subsidy was introduced in 2018 under the Coalition government as part of three-stage reforms to the tax system.

LMITO was stage one and was designed to give low- and middle-income earners immediate tax relief.

The 2022-233 financial year will usher in stage two, which will see the LMITO replaced with other changes to the tax system that will see low- and middle- income earners pay less tax.

In stage two, the 19 per cent tax rate will be expanded to include those earning up to $45,000, rather than $41,000. It will also see the low-income tax offset increased from $445 to $645.

Stage three will see an entire tax bracket scrapped so taxpayers earning between $40,000 and $200,000 a year will face the same marginal tax rate of 30 per cent.

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