Understanding the Impact of LMITO Removal

The Australian tax landscape has undergone a significant change with the removal of the Low and Middle Income Tax Offset (LMITO), which was a temporary measure introduced in 2018 to provide tax relief to low- and middle-income earners. The offset, which offered a maximum benefit of $1,500, was phased out in the 2021-22 financial year and no longer applies for the 2022-23 income year onwards.

 

Impact on Tax Returns

The removal of LMITO has had a noticeable impact on tax returns for individuals earning between $48,000 and $126,000. For those who previously benefited from the offset, the absence of this tax break can result in a smaller tax refund or even a tax bill.

 

Implications for Taxpayers

The change in tax policy has prompted taxpayers to re-evaluate your tax situation and consider strategies to minimise your tax liability. Here are some items for consideration:

 

  • Review Tax Withholdings: Reviewing tax withholding rates from pay checks can help ensure that the right amount of tax is being withheld, avoiding potential tax bills at the end of the financial year.

  • Maximise Deductions: Claiming all eligible deductions, such as work-related expenses, donations, and private health insurance costs, can reduce taxable income and potentially increase tax refunds.

 

If you’re unsure about how the removal of the LMITO will impact you, or you would like to discuss some tax planning strategies to maximise of your tax benefits, reach out to our Accounting Team today.  

Jenni Anderson