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Low-Middle-Income Tax Offset to Wind Down

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A tax break for millions of Australians will expire this year.  The treasurer has confirmed that the tax offset, otherwise known as the Low and Middle Income Earner Tax Offset (LMITO), will not be extended beyond 30 June 2022 and will end in line with the former government’s decision to wind down the relief measure. The LMITO was initially designed to only be paid in the 2019-20 financial year but was extended twice due to the pandemic and was a method of financial assistance to the average taxpayer.

Be advised that this tax offset has been slashed from the budget, effective 1 July 2022. Those taxpayers that have been used to seeing a nice little bonus of  up to $1,500 in additional tax offsets in their tax returns will really feel the pinch in the form of a reduced tax refund when preparing their 2022/2023 income tax return.

The so called “lamington” offset, was introduced in 2018 as a temporary measure under the coalition government as part of three-stage reforms to the tax system.  It was extended by the Morrison government during the covid pandemic and again in Mr Frydenberg’s pre-election budget last year.

That means a person earning $50,000 a year will be subject to a 3.4 per cent or $29 a week cut in their after-tax income when the offset ends in the new financial year.

While someone on earning an average wage of $90,000 will face a 2.1 per cent cut.

A person on $100,000 will be $1200 worse off with the end of the offset.

No changes were made to the low-income tax offset (LITO).  The LITO provides an offset of up to $700 for low-income earners earning taxable income of up to $66,668.

The Treasurer delivered the Federal Budget on Tuesday 25 October 2022.  The budget papers can be found here, https://budget.gov.au/2022-23-october/content/documents.htm.

Should you have any questions or would like to discuss this article further, the team at Gerard Wilkes & Associates are here to help. Do not hesitate to contact us at https://www.wilkes.com.au/contact-us/ or call our office 07 5532 1733.

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