Low Income Tax Offset

 

“LITO” calculation formulae for the tax years 2010 to 2016

LITO is an “offset”, which means it is an amount subtracted from your tax payable. If the calculated LITO offset is greater than your tax payable, the excess is not refundable, and it also can’t be used to offset Medicare Levy.

The LITO is for lower income earners, and does not have to be specifically claimed, because the Tax Office automatically calculates your entitlement in your tax assessment.  (The LITO calculation is provided for in the spreadsheet annual tax calculator)

The LITO Formula is now(1) the same over each of the following financial years:

2012-13 and 2013-14 and 2014-15 and 2015-16 (1)

With effect from 1 July 2012 the full offset is $445, with a withdrawal rate of 1.5 cents per dollar of income over $37,000, such that it cuts out at $66,667.

Here’s the calculation table:

Taxable Income LITO Formula
$0 – $37,000 $445
$37,001 – $66,667 $445 – [(taxable income - $37,000) x 1.5%]
$66,667 + Nil

 

(1) For 2015-16 the LITO is legislated to reduce to $300 with a 1 cent per dollar withdrawal rate on incomes over $37,000. However the effect of Clean Energy tax cut repeal legislation which was introduced to Federal parliament in November 2013 would be to restore the offset to the same formula which has applied since 1 July 2012 – (i.e. $445 with a withdrawal rate of 1.5 cents per dollar). (for progress of the amending Bill see here).


Did You Know.. Tax Instalments Are Higher Than Necessary?

If you’re on a lower income, the Tax Instalment tables don’t take the full LITO into account. For 2012-13 it’s only 18% of the entitlement in each pay calculation, and by 2015-16 it will be gone altogether. This means if you are a wage earner and eligible for LITO, the Tax Office gets a free loan of your money while you wait until your annual tax assessment to get the money back. The details of this under-publicised tax sting are here.


2011-2012 Low Income Tax Offset “LITO” Formula 

The Low Income Offset is available when your taxable income is less than $67,500 in the 2011-2012 tax year. The low income tax offset amount reduces at a rate of 4 cents per dollar of your income over $30,000.

The full Low Income Tax Offset is $1,500 in 2011-2012.

Taxable Income LITO Offset 2011-12
0 – $30,000 $1,500
$30,001 – $67,500 $1,500 – [(taxable income - $30,000) x 4%]
$67,500 + Nil


2010-2011 Low Income Tax Offset “LITO” Formula 

The Low Income Offset is available when your taxable income is less than $67,500 in 2011. The low income tax offset amount reduces at a rate of 4 cents per dollar of income over $30,000.

The full Low Income Tax Offset is $1,500 in 2010-2011.
Taxable Income LITO Offset 2010-11
0 – $30,000 $1,500
$30,001 – $67,500 $1,500 – [(taxable income - $30,000) x 4%]
$67,500 + Nil

2009-2010 Low Income Tax Offset “LITO” Formula 

The Low Income Offset is available when your taxable income is less than $63,750 for the 2010 financial year. The low income tax offset amount reduces at a rate of 4 cents in the dollar, for every dollar of income over $30,000.

The full Low Income Tax Offset is $1,350 in 2009-2010.
Taxable Income LITO Offset 2009-10
0 – $30,000 $1,350
$30,001 – $63,750 $1,350 – [(taxable income - $30,000) x 4%]
$63,750 + Nil

 

See also

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This page was last modified on 13 April 2014