Federal Budget: Low To Middle Income Tax Offset Extended
LMITO stands for Low to Middle Income Tax Offset. You might've heard of this last year - It was supposed to end on 30th of June 2021. So essentially, if you're a low to middle income earner, you can get a maximum of $1,080 off that tax offset. Tax offsets are super powerful - unlike the depreciation, immediate depreciation rules and all these other stuff, a tax offset is literally a discount on the tax bill that you get.
If you usually pay $1,000 in tax, you wouldn't pay tax at all in this situation - It really takes it off the bill straight away. So it is quite powerful, and they've extended that beyond this financial year, which is great. It also applies to a couple, it's just the double amount of the singles which is $1,080 x 2. And yeah, the income that you earn is between $48,000 and $90,000.
This is great news for everyone because that's literally cash back in your pocket when you do your tax returns. It applies to everyone who earns income and pays tax in that threshold obviously in the year that full amount of tax offset, straight away.
Here is one of the ones that actually applies to investors indirectly, where if you're invested in property or shares or investments in your own name, or you receive income from a trust that runs investments, then this is one of the ways that might flow on to you.
In terms of the cash refund offset, I believe it's a non-refundable tax offset. So what happens is it offsets whatever tax you do pay, so you're not going to get extra cash into it. There was a bit of confusion when they released this, last time - everyone knocked on the ATO's door asking, "Where's my $1,000 I was supposed to get." If you didn't pay tax last year, you wouldn't get this as a cash refund - It's just an offset on the tax that you paid already. But if you've pre-paid tax, you will get that as a refund.