About the Low to Middle income tax offset

Commencing this financial year the Government introduced some reforms to the tax system, including the introduction of the low to middle income tax offset. The amount of offset and any refund you may be entitled to differs for everybody. Its based on primarily your income and how much you have paid in tax throughout the year.

If you are an Australian resident for income tax purposes and you pay tax on your taxable income, you may be eligible for both the:

  • low income tax offset
  • low and middle income tax offset.

You don’t have to do anything specific to claim the offsets. When your tax return is lodged the ATO will determine the offset based on the information provided.

Tax offsets reduce the amount of tax payable on taxable income and are non-refundable offsets, so the following applies:

  • any eligible offset amount can only reduce your tax payable to zero, any unused offset amount can’t be refunded
  • it can’t reduce your Medicare levy.

Low income tax offset

If your taxable income is less than $66,667, you will get the low income tax offset.

The maximum tax offset of $445 applies if your taxable income is $37,000 or less. This amount is reduced by 1.5 cents for each dollar over $37,000.

Low and middle income tax offset

If your taxable income is less than $126,000, you will get some of the low and middle income tax offset.

The amount of the offset you are entitled to will depend on your individual circumstances, such as your income level and how much tax you have paid throughout the year.

If you are eligible for the offset, the value could be anywhere between $1 and $1080.

It doesn’t mean that you will get an extra $1,080 in your tax return.

What you need to know about Superannuation Income Streams

Low to Middle Tax Offset FAQ

Will I receive an extra $1080 in my Tax Return?

Unfortunately no… This is a tax offset and will only reduce your amount of tax liability. The tax offset can only bring your tax liability to zero and any unused credits are not refundable.

Do I need to do anything to claim the offset?

You just have to complete your tax return like you always have and the ATO will ensure that your eligible offset will be applied and your tax return will be adjusted accordingly.

Which financial years is the new low and middle income tax offset available?

The new low and middle income tax offset is available for the 2018-19, 2019-20, 2020-21 and 2021-22 income years and is in addition to the low income tax offset.

Where can I learn more about the low and middle income tax offsets?

We suggest the ATO’s tax offsets and rebates section on their website. But if you would like that personal touch of interpreting the impact of tax offsets on on your tax return visit your local ITP office.

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