Statement on administration of the low and middle income tax offset

Lower taxes for hard-working Australians: Building on the Personal Income Tax Plan

The Government's changes to the Personal Income Tax Plan as announced in the 2019–20 Federal Budget, are now law. (See aph.gov.auExternal Link link).

The ATO is implementing the necessary system changes so taxpayers that have already lodged their 2018-19 tax return will receive any increase to the low and middle income tax offset they are entitled to. Any tax refund will be deposited in the taxpayers nominated bank account. You will not need to request an amendment.

Assessments for returns already lodged are expected to start to issue from Friday 12 July and into the following week, which is in line with the normal processing of refunds for this time of year.

The legislation introduces changes to income tax thresholds and tax offsets.

As a non-refundable offset, any unused low and middle income tax offset cannot be refunded. The low and middle income tax offset will directly reduce the amount of tax payable but does not reduce the Medicare levy. If not all the offset is used to reduce the tax payable, there is no refund of any unused portion.

From the 2018–19 income year:

• Increase the low and middle income tax offset from a maximum amount of $530 to $1,080 per annum and increase the base amount from $200 to $255 per annum
• Taxpayers with a taxable income which does not exceed $37,000 will receive a low and middle income tax offset of up to $255
• Taxpayers with a taxable income which exceeds $37,000 but is not more than $48,000 will receive $255, plus an amount equal to 7.5 per cent to the maximum offset of $1,080
• Taxpayers with a taxable income which exceeds $48,000 but is not more than $90,000 will be eligible for the maximum low and middle income tax offset of $1,080
• Taxpayers with a taxable income which exceeds $90,000 but is not more than $126,000 will be eligible for a low and middle income tax offset of $1,080, less an amount equal to 3 per cent of the excess.

From the 2022–23 income year:

• The top threshold of the 19 per cent personal income tax bracket will increase from $41,000 to $45,000 such that the rate of tax on the amount of the taxable income of a resident individual that:    
  • exceeds $18,200 but is not more than $45,000 is 19 per cent
  • exceeds $45,000 but is not more than $120,000 is 32.5 per cent
  • exceeds $120,000 but is not more than $180,000 is 37 per cent
  • exceeds $180,000 is 45 per cent
   
• Increase the low income tax offset (LITO) from a maximum amount of $645 to $700 per annum
• Taxpayers with a taxable income which does not exceed $37,500 will receive a LITO of $700
• Taxpayers with a taxable income which exceeds $37,500 but is not more than $45,000 will receive a LITO of $700, less an amount equal to 5 per cent of the excess
• Taxpayers with a taxable income which exceeds $45,000 but is not more than $66,667 will receive a LITO of $325, less an amount equal to 1.5 per cent of the excess.

From the 2024–25 income year:

• The 32.5 per cent marginal tax rate will reduce to 30 per cent such that for a resident individual the rate of tax on the amount of their taxable income that:    
  • exceeds $18,200 but is not more than $45,000 is 19 per cent
  • exceeds $45,000 but is not more than $200,000 is 30 per cent
  • exceeds $200,000 is 45 per cent.
   

2018–19 administrative treatment

The ATO is implementing the necessary system changes so taxpayers that have already lodged their 2018-19 tax return will receive any increase to the low and middle income tax offset they are entitled to. Any tax refund will be deposited in the taxpayers nominated bank account. You will not need to request an amendment.

Assessments for returns already lodged are expected to start to issue from Friday 12 July and into the following week, which is in line with the normal processing of refunds for this time of year.

More information

For more information, refer to Budget 2019–20 Part 2External Link, page 17–18.

Details on the Personal Income Tax Plan changes announced in the 2018–19 Federal Budget which are now law can be

Source: ato.gov.au