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A Guide to LITO and LMITO (Tax Offsets)

Tax time is an exciting period for some people who, with the help of tax offsets like the Low Income Tax Offset (LITO) and the Low and Middle Income Tax Offset, receive bigger refunds! With tax offsets like LITO, more Australians can look forward to tax time.

Want another $700 on your tax return this year and a fast tax return? Read on!

If you are a low or middle income earner in Australia, looking to increase your tax refund, this blog is for you. In this blog, we will answer what is low income tax offset (LITO), what is low and middle income tax offset (LMITO), the differences between the two, and how you can claim your LITO in your tax return this year.

Firstly, lets look at what the low income tax offset is

What is low income tax offset? LITO offers a rebate to low-income earners, reducing their tax payable. LITO can only lower your tax payable, to ensure the tax you have paid is refunded to you when you complete your tax return. It is not a refund if you haven’t actually paid any tax during the year.

For people earning $37,500 or less, they will receive the maximum $700 offset. People earning between $37,501 to $66,667 receive a discounted offset as per the table below.

Taxable incomeMaximum offset amount
$37,501-$45,000$700 minus 5 cents for every $1 above $37,500
$45,001-$66,667$325 minus 1.5 cents for every $1 above $45,000

For example, someone earning $35,000 a year in 2022-23 that had $5,000 tax withheld from their wages ordinarily would receive a refund of $1,108 as a tax return. As they receive the $700 offset, their tax refund increases by $700 to $1,808. Remember, LITO only works if you’ve had tax withheld from your payments.

To find your tax payable, use our Income Pay Calculator. Tax calculators are great tools for planning your tax around this time of the year. You can use a tax calculator to work out your predicted refund and balance your spending during the year accordingly.

What was the low middle income tax offset (LMITO)?

LMITO stands for Low and Middle Income Tax Offset. LMITO was a tax offset that was temporarily in place between 1st July 2018 to 30th June 2022. This offset gave workers earning up to $126,000 a maximum tax break of $1,500. Like the LITO offset, LMITO only reduces the tax payable amount where you have paid tax during the year. If you do not use the full offset amount, it is not refundable. It’s easy to work this out in your online tax return.

Taxable incomeMaximum offset amount
$37,001-$48,000$675 plus 7.5 cents for every $1 above $37,000, to a max of $1,500
$90,001-$126,000$1,500 minus 3 cents for every dollar above $90,000

For example, a person earning $43,000 a year in 2021-22 would pay $4,712 in tax excluding the Medicare levy. The person receives $675 plus 7.5 cents for every $1 over $37,000, to a maximum of $1,500. That means they reduce their tax payable to $3,587.

$43,000 – $37,000 = $6,000 (Amount over $43,000)

$6,000 * $0.075 = $450 (7.5 cents for every $1 above $43,000)

$450 + $675 = $1,125 (Total amount saved on tax)

$4,712 – $1,125 = $3,587 (Total base tax payable)

If they had $6,000 of tax withheld during the year from their wages by their employer, they would receive a tax refund of $2,413 on their tax return. When you complete your online tax return, the system works all this out for you to make your life easy.

What is the difference between LITO and LMITO? 

Ok, so where throwing acronyms around the place here in relation to tax offsets! However, what is the difference between LITO and LMITO? The main difference is LMITO was bigger but has been discontinued as of 30th June 2022 and will no longer be available for Australians. LITO is still available and will help many Australians in need, come time to lodge your online tax return in 2023 onwards.

LMITO was in place to help low and middle-income earners, earning up to $126,000 per year. LITO is in place to help low-income earners, earning up to $66,667 per year.

You can still claim the low middle income tax offset (LMITO) if you haven’t lodged your tax return for the last few years. Jump online now to lodge your tax return if you haven’t already.

How do I claim LITO?

How can you claim this year’s Low Income Tax Offset or the Low and Middle Income Tax Offset for previous years? The good news is, claiming the tax offsets are easy with One Click Life.

When you submit your online tax return with One Click Life, your LITO and LMITO will automatically be calculated. There is no need to fill out extra data during the process, meaning you can fill out your online tax return just as fast as you normally would. In fact, when it comes to fast tax returns or easy tax returns, One Click Life wins hands down!

So, let’s wrap this up so you can get to lodging your tax return online! The main purpose of writing this blog is to answer the question “What is low income tax offset”. The Low Income Tax Offset (LITO) and the Low and Middle Income Tax Offset (LMITO) have been put in place to help struggling Australians ease their cost of living. LMITO has come to an end after the 2021-22 tax year, although the LITO remains in place. LMITO has helped Australians that earned up to $126,000 per year providing a maximum offset of $1,500. LITO continues to help Australians that earn up to $66,667 per annum with a maximum offset of $700. By using One Click Life, your tax offset will automatically be applied, making your tax return lodgement fast and easy.

One Click can help with your tax return!

One Click Life makes it simple to track and organise all your life’s admin in one place. Operated by finance and tax professionals, One Click Life allows you to complete your online tax return fast from your mobile phone.

Dealing with an online tax adviser is the easiest way to complete your tax return. You can also claim your online tax agent fees as a tax deduction – increasing your refund and getting the help you need for an easy tax return. One Click Life can also help with your Mortgage, Will, and Health Insurance, so you can spend more time on things that matter.