What Is The Low And Middle Income Tax Offset (LMITO)?

If you have lodged, or are yet to lodge your tax return you may, you may be happy to know that your tax return could be $1,080 bigger. This bundle of joy comes in the form of the low and middle-income tax offset, which will be handed out to Australian taxpayers earning up to $126,000 a year.

What is the low and middle tax offset?

In the 2019-2020 Federal budget, the Coalition Government announced its intention to revise the Personal Income Tax Plan. The proposal has now passed Parliament and has started to roll out across this year’s tax returns.

The low and middle-income tax offset is designed to help Australians lower the amount of tax they have to pay. As an offset, it will directly reduce the amount of tax payable. Unfortunately, the LMITO will not reduce the Medicare Levy for taxpayers, but it will reward over 70% percent of hard-working Australians with some extra cash.

Are you eligible for LMITO?

With approximately 650,000 Australians lodging their tax return in the first week of July, it is clear that many are already rushing to claim the tax offset. The ATO also estimates that 4.5 million Australians will be eligible to claim the full LMITO of $1,080, with another 5.6 million receiving partial payment. Whether you are eligible is entirely up to your taxable income.

LMITO taxable income thresholds

The following thresholds apply for the 2018/2019 financial year

alc table 1 100719

Example: Oscar

Over the 2018/2019 financial year, Oscar will earn a taxable income of $70,000.

Oscar will receive the full refund of $1,080.

Example: Shannon

Shannon is a paralegal working at a law firm in the CBD. Her taxable income for the 2018/2019 financial year is $47,000. Her LMITO will be calculated as follows;

$255 + (7.5% x ($47,000 – $37,000))

= $255 + (7.5% x $10,000)

$255 + $750

= $1,005

Shannon will be entitled to receive a refund of $1,005

Example: Jason

This financial year Jason will earn a taxable income of $108,000. His LMITO will be calculated as follows;

$1,080 – (3% x ($108,000 – $90000))

= $1,080 – (3% x $18,000)

$1,080 – $540

= $540

LMITO =$540

How do I get my LMITO?

If you are eligible for the tax offset, the refund will automatically reflect on your tax refund. The money will be deposited into your nominated bank account. According to the ATO, you do not need to request an amendment.

What’s next?

The government’s tax reform is based around two more stages of stage reform, beginning in 2022-23 and the final reform in 2024-25.

Low Income Tax Offset: 2022/2023

Future changes to the low income tax offset

Some will benefit more than others. High-income earners will benefit as they will receive a larger tax cut. For example, in the third stage of the government’s tax plans, a high-income earner receiving $20, 0000 may receive an offset of $11,640.

News Tax Debt Loans & Relief

Tax Help for Small Businesses to Pay Tax Debt

Small and medium enterprises (SME’s) with tax debts owed to the Australian Tax Office are likely to start feeling pressure to repay those debts by now. The ATO is expected to start ramping up actions to get those debts repaid. Debts to the ATO mounted up to $35.3 billion in the 2013-14 period and that was a 9.7 percent increase over the previous year. Because that amount is growing so fast and is so large, the ATO is going to have to start increasing their collection efforts and SME’s should be warned.

The debt amount has grown so large that the ATO will probably make the penalties for late debt repayments much stricter in the future. The ATO will hope that the tougher penalties on late debt repayments will motivate SME’s to pay their debts on time.

SME’s often have the capital to pay their debts to the ATO but have not managed their working capital properly. Those SME’s that have delayed making their debt payments have likely been making the short term decision to use their capital in their business instead of paying their debts.

Delaying paying debts to the ATO can get an SME on a dangerous path that can lead to severe penalties from the ATO. There are ways for SME’s to get the capital to pay their debts and keep their businesses running.

Tax Help for SME’s

There are bank and non-bank lenders that make loans available for tax help. Tax help loans are common and can be had at reasonable rates. A business just needs to apply.

Tax help loans from non-bank lenders are often easier to get and are less strict. SME’s should do everything they can to avoid having the ATO come after their assets to pay off their debts. In order to pay off the debts to the ATO a bank or non-bank loan can be taken to pay off the debt. This will allow the business to stay open and profitable while paying off the loan.

If your business has debts with the ATO then you should take action now. Tax help loans are affordable and available. It is much easier to pay off a loan to a bank or non-bank lender than dealing directly with the ATO. Reach out to a non-bank lender like the Australian Lending Centre to see how we can help you with your tax debts.