In the 2019-2010 Federal Budget, the government laid out its plans to change and increase the Low and Middle Income Tax Offset (LMITO) to build a new tax system that recognizes the hardworking people of Australia. The enhanced tax offset is now fully in effect.
What is LMITO?
The Low and Middle Income Tax Offset (LMITO) aims to lower the amount of income taxes low and middle income earners pay. As a tax offset, it only applies to taxes you actually need to pay and not for refunds.
The LMITO does not replace the Low Income Tax Offset (LITO). The LITO is still in effect and will continue to be throughout the operation of LMITO, which will end on June 30, 2020.
The new LMITO increased from a maximum of $530 in 2018-2019 budget to $1,080 per annum. The base amount also increased from $200 to $255 per annum.
How to avail of LMITO?
You don’t have to apply for LMITO. The ATO will assess your tax return and determine if your taxable income makes you eligible for the tax offset.
The following are eligible for the tax offset. Taxpayers with a taxable income:
- of $37,000 or below can now receive a low and middle income tax offset of up to $255
- above $37,000 and below $48,000 can now receive $255, plus an amount equal to 7.5% to the maximum offset of $1,080
- above $48,000 and below $90,000 are now eligible for the maximum low and middle income tax offset of $1,080
above $90,000 but is no more than $126,000 are now eligible for a low and middle income tax offset of $1,080, less an amount equal to three per cent of the excess.
The new targeted tax offset will benefit over 10 million low- and middle‑income earners.
Commitment to a progressive tax system
Under the enhanced tax offset plan, the tax revenue will drop by $19.5 billion throughout the estimate period. Nonetheless the measure is expected to, overall, deliver a better and internationally competitive tax system in the long run.
The government is committed to maintaining a progressive tax system in the country. It promises to continue to ensure that higher-income groups contribute a larger share of the country’s tax revenue and that low to middle income-earners get rewarded for their hard work.
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