End of the lamington (LMITO)
Australia’s most popular tax cut is coming to an end and it’s going to make the cost of living even harder to handle.
If your taxable income is below $126,000, please be aware that the Low and Middle-Income Tax Offset (LMITO) has ended on 30 June 2022, which will impact your tax returns for the 2022-23 financial year. This means that without the offset, your tax bill will be higher this year, resulting in either a higher tax liability or a lower tax refund during tax time.
Although the LMITO received a boost by $420 for the 2021-22 income year, referred to as the one-off $420 cost of living tax offset, the Treasurer has confirmed that it will no longer continue for the 2022-23 income year. Unfortunately, this change affects over 10 million middle-income Australians and increases their tax burden, especially during a time when many are facing rising living expenses such as mortgage rates, rent, and other expenses.
We should note here that while they are removing the LMITO, they are keeping the Low-Income Tax Offset (LITO), the LITO is a tax offset available to Australian residents who earn less than $66,667 per year. The offset reduces the amount of tax payable by a maximum of $700 for individuals who earn less than $37,500 per year. For taxpayers earning between $37,501 and $45,000 per year, the offset reduces depending on your income. A minimum offset of $255 is available to those earning between $45,001 and $66,667. It’s important to note, the offset can only reduce tax payable to nil – any excess offset is not refundable. Plus, instead of paying the LITO as a refund, it may be used to reduce any outstanding debt you might have with the ATO.
If you have questions in relation to the above, or any other matters, please do not hesitate to contact our office on 1300 620 345.