How will the end of the Low and Middle-Income Tax Offset affect your tax liability or refund?

If you are a Low and middle-income earners with taxable income below $126,000, you should be aware that the Low and Middle-Income Tax Offset (LMITO) has ended as of 30 June 2022, which will impact your tax returns for the 2022-23 financial year. Without the offset, your tax bill will be higher this year, resulting in a higher tax liability or a lower tax refund during tax time.

The LMITO was in effect for the past four financial years and received a boost of $420 for the 2021-22 income year in the 2022-23 federal budget, referred to as the one-off $420 cost of living tax offset. However, the Treasurer has confirmed that it will not continue for the 2022-23 income year, increasing the tax burden for over 10 million middle-income Australians. Unfortunately, this comes at a time when many are facing rising living expenses, such as mortgage rates, rent, and other costs.

It’s important to note that the LMITO is a tax offset that reduces the amount of tax needed to be paid on taxable income, not a cash refund. Please refer to the table below to determine the amount of offset that could have been received for the previous financial year (2021-22) based on taxable income. Please remember that this offset will not be applied to the current year’s (2022-23) tax obligation as it no longer exists.

Taxable Income Offset Amount
$37,000 or less $675
From $37,001 to $48,000 $675 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,500
From $48,001 to $90,000 $1,500
From $90,001 to $126,000* $1,500 minus 3 cents for every dollar of the amount above $90,000

*Note: If your taxable income is $126,000 or more, you will not receive the LMITO.

For more information about the LMITO, please visit the ATO:

Should you require any additional assistance please don’t hesitate to contact us.

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