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26 July 2018

Understanding the Low & Middle-Income Tax Offset

Understanding the Low & Middle-Income Tax Offset

As announced in this year’s Budget, the Low and Middle-Income Tax Offset (LAMITO) has come into effect from 1 July, and this has led to some confusion regarding tax rates and how this affects wages for those earning within the offset thresholds.

The LAMITO is a non-refundable tax offset of up to $530 annually and is available to all Australian resident low and middle-income earners.

The offset amount will be applied when you lodge your tax return at the end of the financial year. This means it will not reduce the tax rate currently used to calculate your weekly, fortnightly or monthly wages but will instead reduce the overall tax on your total annual income by the prescribed offset amount.

The offset amount depends on what your total income for the year is. Those with a taxable income:

  • of $37,000 or less will benefit up to $200.
  • between $37,000 and $48,000 will see the value of the offset increase at a rate of 3 cents per dollar to the maximum benefit of $530
  • from $48,000 to $90,000 will get the maximum benefit of $530
  • from $90,001 to $125,333 see the offset phase out at a rate of 1.5 cents per dollar.

The LAMITO will be offered in addition to the existing Low-Income Tax Offset (LITO), which is currently offered to individuals earning up to $66,667. The maximum amount offered for the LITO is $445 and applies if your taxable income is $37,000 or less. This amount is reduced by 1.5 cents for each dollar over $37,000, up to $66,667.

The Low-Income Tax Offset will continue to be offered indefinitely, while the Low and Middle-Income Tax Offset will only be offered for the next 4 financial years and is set to finish on 30 June 2022.


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