Every accountant in existence has been facing this question at the start of each financial year since 2018... do I get the $1,080 payment?
So let's delve into it and find out exactly what it is.
The news media has a habit of hyping up the Low and Middle Income Tax Offset in June/July every year without fail and with that comes a lot of misinformation about how it's delivered and what it actually is.
To start with - it's a tax offset. Similar to a deduction but not quite - it's better. Deductions reduce the taxable income that you pay tax on whereas an offset reduces the tax itself. A $1 deduction may reduce your tax by $0.32, whereas a $1 tax offset reduces your tax by $1.
As stated in the name, the Low and Middle Income Tax Offset is targeted at Low and Middle Income earners. Low Income earners also benefit from the Low Income Tax Offset, hence why Middle Income earners are the ones receiving the bulk of the LMITO.
Now let's answer some of the most frequently asked questions.
Who receives the offset?
It's available to those earning up to $126,000. The formula of how it's calculated is below:
Income | Offset |
up to $37,000 | $255 |
$37,001 to $48,000 | $255 plus 7.5 cents for each dollar over $37,000 |
$48,001 to $90,000 | $1,080 |
$90,001 to $126,000 | $1,080 less 3 cents for each dollar over $90,000 |
When will I receive my offset?
In short - as part of your tax refund. It's included in the estimate you receive when you complete your tax, either on mygov or through a tax agent. The offset isn't paid separately - though this is sometimes the impression that's given in the media.
Why don't I receive the offset?
There are a few reasons for this, it could possibly be that a) you earned too much to be eligible, or sometimes b) you haven't paid enough tax to receive the full offset.
The LMITO is a non-refunable tax offset, meaning that it can reduce your tax payable to $0 and enable you to receive all of the tax you've already paid back - but if the offset is higher than the tax you've paid, you won't receive an additional refund. For those who haven't paid any tax or have paid less than $1,080 tax you may not see much/any benefit in the offset.