How do the changes to the LMITO affect me?
Earlier this year, the Australian Government passed legislation that many believe will keep more money in their pocket at tax time this year. But with recent changes since the election, it can be difficult to understand what a new ‘tax offset’ will actually mean.
Determining if you will get any extra money back with this new offering will come down to how much you earn. Here’s the low down on the new ruling:
Which tax offsets apply to me? The LMITO or the LITO?
The Low to Middle Income Tax Offset (LMITO) comes in two stages. From 1 July 2018 until June 2022 the new offset will be available for those earning less than $126,000. It is likely to be worth between $255 and $1,080, depending on your income. Those earning less than $66,667 are also still eligible for the existing Low Income Tax Offset (LITO), which is worth up to $445. The LMITO is calculated to maximise tax refunds for those with incomes of around $48,000 to $90,000, with these people entitled to claim the full tax offset of $1080. Once your income exceeds $90,000, your entitlement reduces by $0.03 in each additional dollar up to $126,000 where it stops altogether.
How long will this offset policy last? And what are other future tax cuts?
On 1 July 2022 the LMITO will finish. However, people earning below $66,667 will still be entitled to a LITO of up to $700. The threshold for the 19 per cent personal income tax bracket will increase, which means with all the other tax cuts introduced people earning between $37,000 and $45,000 a year will pay just 19 per cent tax instead of 32.5 per cent.
From the 2024–25 financial year those earning between $45,000 and $120,000 will have their marginal tax rate reduced from 32.5 per cent to 30 per cent, those earning between $120,000 and $180,000 will have their marginal tax rate reduced from 37 per cent to 30 per cent, and those earning between $180,000 and $200,000 will have their marginal tax rate reduced from 45 per cent to 30 per cent.
What do I have to do to claim the offset?
Nothing. If you earn between $37,000 and $126,000, you could be eligible for a tax refund worth between $255 and $1080 on your 2018–19 tax return, but the ATO will calculate what you are entitled to when you lodge a return. You don’t need to prepare anything extra.
If you have any questions about your tax return, or how the tax offset might apply to you, give us a call on 08 8272 5620
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