What is the $1,500 low and middle income tax offset and how will it affect my tax return in 2023?

As you may have heard through various news channels and articles such as this one by channel 7, millions of Australians are due to feel a sharp increase in their taxes which will result in lower tax returns in 2023. Why? Because the generous low and middle income tax offset (LMITO) of up to $1,500 has expired and will not be available for the 2023 financial year.

It’s important to note that there is a difference between the low income tax offset (LITO) which is still available and the low and middle income tax offset (LMITO) which has expired.

Overview of the low and middle income tax offset (LMITO)

The Low and middle Income Tax Offset (LMITO) is a tax benefit that has been available to eligible Australian taxpayers since 2018. Taxpayers earning between $37,000 and $126,000 for the 2021-22 financial year were able to benefit from this offset for an amount of up to $1,500.

However, this offset is no longer available for the 2023 financial year, as you might have heard from media outlets throughout Australia, and in turn, this will lead to smaller tax returns for millions of individuals and sole traders compared to last year.

Overview of the low income tax offset (LITO)

The low income tax offset (LITO) has been available for many years, is still available, and has not expired like the LMITO. This tax offset will still provide some relief to those who earn less than $66,667 for the 2022-23 financial year. Eligible taxpayers can claim the LITO when they file their tax returns.

For the 2022-23 financial year, the maximum LITO amount is $700.

Table showing estimated decline in tax refund for the 2023FY due to the expiry of the Low and middle income tax offset.

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Are you an Australian based employee or sole trader who needs help with their tax return?

CTK Accounting is a boutique accounting firm based in Wollongong, NSW. We deliver exceptional results to our clients. To get in contact you can reach out via our contact page, to find out more about us check out our website.

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Download LMITO update PDF.

If you are an accountant or bookkeeper looking to share the LMITO expiry update with your clients we have created a completely free and unbranded PDF you can download and share with whoever you choose.

The PDF contains an easy to understand description of the LMITO and LITO and how the expiry will effect your clients tax return based on their level of income.

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Download PDF Here.