Tax law is constantly evolving and changing. Sometimes policies are introduced for a specified period and sometimes they are permanent. When it comes to the Low and Middle Income Tax Offset, it was great while it lasted but now it’s gone. So what does that mean for you?
The Low and Middle Income Tax Offset (LMITO for short) was introduced in the 2018-2019 tax year for 2 main reasons:
- As a temporary measure to provide tax relief for eligible taxpayers
- To assist with managing tax bracket creep which was forcing people into higher tax brackets without the benefit of improving their standard of living
In 2021-22, the LMITO was increased by the addition of a “cost of living tax offset”. However, it all ended on June 30 this year.
What happens now?
The benefits of the LMITO only occurred when submitting your annual tax return so for employees, its demise won’t affect your take home pay. However, at the end of this financial year, you may find your tax refund is lower than it has been in recent years and by as much as $ 1,500.
For self-employed people, the tax offset may have lowered the amount of personal income tax you paid so now, you should consider putting more money aside to cover next year’s tax bill.
Australian residents earning less than $66,667 this financial year, will benefit from a Low Income Tax Offset. It will kick in when you submit your tax return at the end of the current financial year and could potentially reduce your taxable income.
Death and Taxes … we can help you with one of these
They say there are two things in life you can depend on – death and taxes. We can help you with your taxes and it’s not just a pre-June 30 thing. We work with our self-employed, SMSF and investor clients throughout the year, providing advice on managing their taxable income in a way that could legitimately reduce their tax burden. Get in touch to learn how we may be able to assist you as well.