The Low and Middle Income Tax Offset (LMITO) was introduced by the Australian Government in 2018, and it is designed to reduce the amount of tax that low and middle income earners pay each year. It provides a tax offset of up to $1,080 to those earning up to $126,000 per year, with the amount of the offset reducing as income increases. Recently, the Australian Government announced changes to the LMITO that will come into effect from 1 July 2021. This article will explain these changes and how they will impact taxpayers.
Understanding the LMITO Changes
The LMITO was introduced to provide tax relief for low and middle income earners, and it has been an effective way of reducing the amount of tax people pay. However, the Government has recently announced changes to the LMITO that will come into effect from 1 July 2021. These changes will increase the amount of the offset from $1,080 to $1,350, and it will also be available to those earning up to $180,000 per year. The amount of the offset will reduce as income increases, with those earning between $126,000 and $180,000 receiving a reduced offset.
How the Changes Impact Taxpayers
The changes to the LMITO will benefit all taxpayers, but the biggest beneficiaries are those earning between $126,000 and $180,000 per year. This group will now be eligible for the offset, and they will receive a reduced amount of the offset as their income increases. For example, those earning $150,000 per year will receive a tax offset of $1,080, while those earning $180,000 per year will receive a tax offset of $525.
For those earning less than $126,000 per year, the changes will mean that they will receive a larger tax offset than before. This will reduce the amount of tax they pay and provide a welcome boost to their disposable income.
The changes to the Low and Middle Income Tax Offset (LMITO) are a welcome move by the Australian Government and will provide much-needed tax relief for low and middle income earners. The changes are set to come into effect from 1 July 2021, so it is important for taxpayers to familiarise themselves with the changes and how they will impact them.
