You may have already heard of the Low and Middle Income Tax Offset (LMITO), a nice $1080 bonus on your tax return announced by the government.
However, you may have also lodged earlier than usual, like 88% of other Australians compared to the previous financial year, only to find you didn’t get the amount you expected.
So, we’re breaking down the guidelines around this offset introduced in early July, to help you understand your individual tax return.
Who qualifies as a Low and Middle Income earner?
The government considers LMITO earners as anyone who earns under $126,000, and above $37,000. So, if you’re earning over $126,000, you’re not going to receive the benefit. The same goes for those who earn under $37,000. However, if you earn between $37,000 and $126,000, you still may not earn the full $1080, but you should expect a portion of it, depending on your salary level.
During 2018-19 financial year, if you earned;
- Between $48,000 and $90,000 you will receive the full $1080 offset.
- Between $90,000 and $126,000 you will receive $1080 minus 3% of every dollar over $90,000.
- Less than $48,000 you will receive $255 plus 7.5% of every dollar you earned over $37,000.
That’s a lot of math, and since we are accountants, we will break it down for you with a few examples.
Kate earns $112,000, which is just below the $126,000 cut-off for the full $1080 offset. While she’s entitled to the benefit, it will be minus 3% of the total amount over the $90,000 threshold (in this case, $22,000).
Dan earns $46,000, which is just below the $48,000 threshold for the full $1080 offset. He will receive the $255 base offset, plus 7.5% of the total amount over the $37,000 (in this case, $9000).
Basically, what you receive depends on how much you earned during the 2018-19 financial year.
What does the offset mean for your tax return?
If you were expecting to receive a refund, you’ll get a lovely boost, or it will soften the blow if you owe the government any money.
If you haven't already done your tax return, you won't need to do anything additional - the amount will automatically be added to your tax return.
Why is there a Low and Middle Income Tax Offset?
Despite low unemployment and interest rates, the economy isn’t doing so well right now, which means consumers are spending less. As one solution to boost the economy, the government has opted for the offset as part of their bigger strategy.
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