The new low and middle income tax offset (LMITO), which was introduced in the 2018/19 Federal Budget, exists in addition to the standing low income tax offset (LITO).
Rumours surrounding the LMITO made many believe that they are entitled to $1,080 after their income tax return is lodged – this is not the case.
Firstly, a key point is that this LMITO is a tax offset, not a cash back scheme. As a result, if you are eligible to receive the offset, it will be used to reduce the tax you owe – not added as an extra amount to your tax return.
Furthermore, as this is a tax offset, you must owe tax in order to be eligible to receive the offset. If you do not owe tax, then there is nothing to offset!
The $1,080 which has been circulating in rumours since the announcement of the LMITO is the maximum tax offset value – it is not a guaranteed figure. For example, if you earn less than $37,000 p.a., then the maximum offset available is $255.
If you are eligible to receive the LMITO, you will receive any offset owing once you have lodged your income tax return. Be aware that this offset only applies for a limited time – until the 2021/22 income year.
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