ATO to reduce your refunds by a maximum $1500, due to the abolishing of rebate
With tax season rapidly approaching, we all enjoy exploiting any offset offered by the government to reduce our tax bill. Unfortunately, it’s important to note that the Australian Taxation Office (ATO) has recently announced the Low and Middle-Income Tax Offset (LMITO) has been discontinued and will no longer be available to claim starting from this 2022-23 financial year. You might be wondering how this change affects you and your tax bill.
Firstly, what was the LMITO
The LMITO was introduced in the 2018-19 financial year as a temporary measure to provide relief to individuals earning low to middle incomes. This offset gave taxpayers earning up to $126,000 a maximum tax break of $1,500. It aimed to supplement the income tax cuts introduced by the government and benefit those who may not have benefited significantly from the changes in tax brackets.
The LMITO was structured as a non-refundable tax offset, meaning it could reduce the amount of tax an individual owed. However, it did not result in a cash refund if the offset exceeded the total tax liability if you did not use the full offset amount of $1,500. For example, if you earn $35,000 in the financial year, the maximum you could receive as an offset was $675 and there was no more you could claim or receive. LMITO only reduced the tax payable amount where you had paid tax during the year. The offset amount varied depending on an individual’s taxable income, as seen in the table below, with the maximum benefit available for claiming $1,500 to those earning between $48,001 and $126,000 per year.
| Taxable income | Maximum offset amount |
| $0-$37,000 | $675 |
| $37,001-$48,000 | $675 plus 7.5 cents for every $1 above $37,000, to a max of $1,500 |
| $48,001-$90,000 | $1,500 |
| $90,001-$126,000 | $1,500 minus 3 cents for every dollar above $90,000 |
There is still an offset to be claimed, the Low Income Tax Offset (LITO).
With LMITO being discontinued for the 2022-23 financial year, there is still an offset that can be claimed, called the Low Income Tax Offset (LITO).
Are you finding these acronyms confusing, is this the same offset?
The Low Income Tax Offset (LITO) is in place to help low-income earners, those earning up to $66,667 per year. So, if you earn more than $66,667, you cannot claim this refund.
Similar to the LMITO structure, LITO can only reduce the tax payable amount where you have paid tax during the financial year and it is a non-refundable tax offset. Meaning it will reduce the amount of tax an individual owes but will not result in a cash refund for the portion not offsetting their income. The offset amount varies depending on an individual’s taxable income, as seen in the table below:
| Taxable income | Maximum offset amount |
| $0-$37,500 | $700 |
| $37,501-$45,000 | $700 minus 5 cents for every $1 above $37,500 |
| $45,001-$66,667 | $325 minus 1.5 cents for every $1 above $45,000 |
Impact on taxpayers
The removal of the LMITO will have varying effects on taxpayers depending on their income levels. Individuals who previously benefited from LMITO may experience a slight increase in their tax bill. The extent of the impact will be directly related to their taxable income and how the changes in the regular tax rates and brackets align with their circumstances.
It is important to note that while LMITO has been discontinued, the tax cuts that were implemented alongside its introduction remain in effect. These tax cuts, which were aimed at benefiting low and middle-income earners, are still applicable and will continue to provide some relief.
Rest assured, the discontinuation of the LMITO won’t impact your monthly pay cheque. However, if you previously enjoyed the benefits of this tax offset, its cessation means a higher overall tax payment and a potentially reduced tax refund during tax season.
Don’t forget you CAN now claim for your home office expenses if you are working from home
Remember the ATO has introduced changes to home office claims for the 2022-2023 financial year. These changes aim to reflect the increased costs associated with working from home and to make it more straightforward for taxpayers to claim their home office expenses. You can read our blog here to learn further details of what exactly it means for you.
Geelong Accounting
As you prepare for the upcoming tax return season, it’s always advisable to consult with a tax accountant or use a reliable tax calculator to understand the changes and accurately estimate your tax obligations. Staying informed about tax policy updates is crucial to ensure compliance.
The expertise and experience of our Geelong Accountants at The Hrkac Group can help you with your tax return. If you need assistance or advice about what offsets you can claim or whether you’re entitled to claim working-from-home expenses or any other tax questions, then please get in touch. To make an appointment to meet with one of our friendly Geelong Accountants, contact us via email or phone (03) 5224 2366.
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We are living in a world that is ever more reliant on technology.
Now days, in Australia, you would be hard-pressed to find a business that doesn’t utilise a computer as a part of its day-to-day operations.
Whether it’s for basic invoicing and data storage or as a fundamental tool of your trade, the humble computer has become the workhorse of the modern business.
With that in mind, what would happen if you fell victim to a cyber attack? Would your business still be able to operate?
With scammers becoming more and more sophisticated, regular antivirus software is struggling to keep up. This is leaving businesses vulnerable to a security breach.
Today’s article comes from our friends at Universal Computer Solutions, a local Geelong based IT firm, and it talks to the best ways of combating a cyber attack.
“Top 3 Reasons Your AV Isn’t Stopping Fastbreak Spam” by Universal Computer Solutions.
If you would like to discuss the ways you can significantly decrease the risk of spam containing malware affecting your business, contact the team at Universal Computer Solutions by emailing admin@universal.com.au
Recently the staff at The Hrkac Group participated in the Multi-Sport Festival in Geelong.
The event saw staff from Accounting, Financial Services & Finance complete in either the 5km or 10km fun walk/run events.
It was a great team bonding event and a sense of personal satisfaction for everyone to complete the course.
As a result, we are hoping we may be able to participate in a similar event as a team later in the year.
Recently for Christmas 2012 – the staff of The Hrkac Group Accountants and Financial Services decided that instead of holding a Kris Kringle through their Social Club which is called FIFA, that they would instead donate money to the BayFM Bethany Giving Tree Appeal.
Through this effort over $200 was raised, allowing for some children in Geelong the experience of receiving a Christmas gift, when otherwise they may have missed out.
It is amazing the feeling you can receive from the gift of giving and the knowledge you have made someone smile….
The staff has other ideas in tow so we will update you on these as they occur…
