Does the LMITO apply to me?

The most popular question I’ve had this year so far from clients is without a doubt around the low and middle income tax offset (LMITO). It is evident that all the media hype has caused a lot of confusion around this topic!

Let’s try and clear things up.

Who will receive the LMITO?

If your taxable income is less than $126,000 the LMITO may apply to you.

The amount of the offset you receive will depend on your individual circumstances. This relates to things such as your income level and how much tax you have paid throughout the year.

The offset is non-refundable, meaning it cannot be refunded. It will only directly reduce the amount of tax you must pay (but does not reduce the Medicare levy). If not all the offset is used to reduce the tax payable, there is no refund of any unused portion.

What do you have to do?

You don’t need to do anything extra other than lodge your tax return. The ATO will pay any tax refund (which includes the new offset) into your nominated bank account after your return is lodged.

How much will you receive?

The maximum offset is $1,080 per annum. The base amount is $255 per annum.

The entitlement to the LMITO is not based on whether you’re single or a couple - it’s based on an individual’s taxable income.

If your taxable income is:

  •  less than $37,000, your offset entitlement will be $255

  • more than $37,000 but less than $48,000, your offset entitlement will be $255 plus 7.5% of the excess above $37,000

  • more than $48,000 but less than $90,000 your offset entitlement will be $1,080

  • more than $90,000 but less than $126,000, your offset entitlement will be $1,080, less 3% of the excess above $90,000.

As an example, if you earn $43,000 your LMITO entitlement will be $705. This is calculated with a $255 base amount plus 7.5% of the difference between $37,000 and $43,000.

 Note: Whether or not you will receive a refund is dependent on a number of other factors for example how much PAYG withholding there was on your income.

 It’s always a good idea to speak to you accountant if you are unsure.

 

Vanessa Bell