Low Income Tax Offset


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LITO: Low Income Tax Offset for Low Paid in Australia.

Australian taxpayers are able to benefit from the Low Income Tax Offset [LITO] benefit from the Australian Tax Office (ATO).

The Low Income Tax Offset [LITO] is an end of year rebate for lower income earners, and does not have to be specifically claimed. It will be calculated by the Tax Office in your end of year tax assessment.

It gradually reduces down to zero at a certain threshold.  This is in addition to the new Low and Middle Income Tax Offset effective from July 2018.

The LITO Formula for the Tax Years ending 30 June 2022 are currently set at:.

A full rebate of $445 for taxable incomes up to $37,000
A reducing rebate for taxable incomes between $37,001 and $66,667 (Reduction based on 1.5% of income over $37,000)
No rebate for taxable incomes over $66,667

2018-19 Low Income Tax Offset.

Example of Rebate for incomes between 37,000 and $66,667

$38,000 = ($445 less (1.5% of $1,000 ie: $38,000 – $37,000) $15 = net rebate $ 430
$47,000 = ($445 less (1.5% of $10,000 ie: $47,000 – $37,000) $150 = net rebate $ 295
$57,000 = ($445 less (1.5% of $20,000 ie: $57,000 – $37,000) $300 = net rebate $ 145
$66,000 = ($445 less (1.5% of $29,000 ie: $66000 – $37,000) $435 = net rebate $ 10


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New LITO to apply from 1 July 2022.

There will be an increase to the LITO Rebate from the 2022-23 year. This is essentially an increase of $200 to the rebate for the lower paid.
Under the proposals from 1 July 2022 the new low income offset of up to $645 will replace both LITO and LMITO.

The LITO Formula for the Tax Years commencing 1 July 2022 are currently proposed at:

A full rebate of $645 for taxable incomes up to $37,000
A reduced rebate from $645 for taxable incomes between $37,001 and $41,000 (Reduction based on 6.5% of income over $37,000)
A reduced rebate from $385 for taxable incomes between $41,001 and $66,667 (Reduction based on 1.5% of income over $41,000)
No rebate for taxable incomes over $66,667

Example of Rebate for incomes between 37,000 and $66,667

$38,000 = ($645 less (6.5% of $1,000 ie: $38,000 – $37,000) $65 = net rebate $ 580
$47,000 = ($385 less (1.5% of $10,000 ie: $47,000 – $41,000) $90 = net rebate $ 295
$57,000 = ($385 less (1.5% of $20,000 ie: $57,000 – $41,000) $240 = net rebate $ 145
$66,000 = ($385 less (1.5% of $29,000 ie: $66000 – $41,000) $375 = net rebate $ 10


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2016-17 Low Income Tax Offset.

  • Incomes under $37,000 will be eligible for the full $445 LITO, this rebate reduces by 1.5 cents in every dollar that the income exceeds $30,000.
  • Annual Income of $20,542 or under will pay no tax.
  • This offset cuts out at an income of $66,667 in 2016-17

If your taxable income is less than $66,667, you will get the low income tax offset. The maximum tax offset of $445 applies if your taxable income is $37,000 or less. This amount is reduced by 1.5 cents for each dollar over $37,000.www.ato.gov.au/../Low-income-earners

 

2012-13 Low Income Tax Offset

  • Incomes under $37,000 will be eligible for the full $445 LITO, this rebate reduces by 1.5 cents in every dollar that the income exceeds $30,000.
  • Annual Income of $20,542 or under will pay no tax.
  • This offset cuts out at an income of $66,667 in 2012-13

 

2011-12 Low Income Tax Offset

  • Incomes under $30,000 will be eligible for the full $1,500 LITO, this rebate reduces by 4 cents in every dollar that the income exceeds $37,000.
  • Annual Income of $16,000 or under will pay no tax.
  • This offset cuts out at an income of $67,500 in 2011-12

 

2010-11 Low Income Tax Offset

  • Incomes under $30,000 will be eligible for the full $1,500 LITO, this rebate reduces by 4 cents in every dollar that the income exceeds $30,000.
  • Annual Income of $16,000 or under will pay no tax.
  • This offset cuts out at an income of $67,500 in 2010-11

 

2009-10 Low Income Tax Offset

  • Incomes under $30,000 will be eligible for the full $1,350 LITO, this rebate reduces by 4 cents in every dollar that the income exceeds $30,000.
  • Annual Income of $15,000 or under will pay no tax.
  • This offset cuts out at an income of $63,750 in 2009-10

 

2008-09 Low Income Tax Offset

  • Incomes under $30,000 will be eligible for the full $1,200 LITO, this rebate reduces by 4 cents in every dollar that the income exceeds $30,000.
  • Annual Income of $14,000 or under will pay no tax.
  • This offset cuts out at an income of $60,000 in 2008-09

 

My calculation of the 2008-09 rebate on a taxpayer with an income of $14,000 is:

  • $14,000 Taxable income
  • $6,000 Tax Free Threshold
  • $ 8,000 taxable at 15%
  • = Tax payable of $1,200 less the $1,200 offset = No Tax to pay

 

As an example of the changes in the Low Income Tax Offset from 2009-10 to 2010-11, as detailed in the 2008 Budget.

Gross Income $20,000
Tax in 2009-10 was $2,100 less LITO $1,350 = $750 tax
Tax in 2010-11 it is $2,100 less LITO $1,500 = $600 tax
$150 tax saving or 20.0% reduction from the 2009-10 tax payable.

Gross Income $60,000
Tax in 2009-10 was $11,850 less LITO $150 = $11,700 tax
Tax in 2010-11 it is $11,550 less LITO $300 = $11,250 tax
a saving of $450 or 3.85% reduction from the 2009-10 tax payable.

 

Sources:

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