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Aug 08 2009

Low Income Tax Offset

Australian taxpayers are able to benefit from the Low Income Tax Offset [LITO] benefit from the Australian Tax Office (ATO).

This Low Income Tax Offset rebate is given to those people with low taxable incomes, and gradually reduces down to zero at a certain threshold.

Important!

From 1 July 2012, the LITO threshold will increase from $30,000 to $37,000.
You are entitled to receive the offset if your taxable income is below $66,667.
The maximum value of $445 begins to be phased out at the reduced rate of 1.5 cents for each dollar of taxable income over $37,000.

 

2012-13 Low Income Tax Offset

  • Incomes under $37,000 will be eligible for the full $445 LITO, this rebate reduces by 1.5 cents in every dollar that the income exceeds $30,000.
  • Annual Income of $20,542 or under will pay no tax.
  • This offset cuts out at an income of $66,667 in 2012-13

 

2011-12 Low Income Tax Offset

  • Incomes under $30,000 will be eligible for the full $1,500 LITO, this rebate reduces by 4 cents in every dollar that the income exceeds $37,000.
  • Annual Income of $16,000 or under will pay no tax.
  • This offset cuts out at an income of $67,500 in 2011-12

 

2010-11 Low Income Tax Offset

  • Incomes under $30,000 will be eligible for the full $1,500 LITO, this rebate reduces by 4 cents in every dollar that the income exceeds $30,000.
  • Annual Income of $16,000 or under will pay no tax.
  • This offset cuts out at an income of $67,500 in 2010-11

 

2009-10 Low Income Tax Offset

  • Incomes under $30,000 will be eligible for the full $1,350 LITO, this rebate reduces by 4 cents in every dollar that the income exceeds $30,000.
  • Annual Income of $15,000 or under will pay no tax.
  • This offset cuts out at an income of $63,750 in 2009-10

 

2008-09 Low Income Tax Offset

  • Incomes under $30,000 will be eligible for the full $1,200 LITO, this rebate reduces by 4 cents in every dollar that the income exceeds $30,000.
  • Annual Income of $14,000 or under will pay no tax.
  • This offset cuts out at an income of $60,000 in 2008-09

 

My calculation of the 2008-09 rebate on a taxpayer with an income of $14,000 is:

  • $14,000 Taxable income
  • $6,000 Tax Free Threshold
  • $ 8,000 taxable at 15%
  • = Tax payable of $1,200 less the $1,200 offset = No  Tax to pay


As an example of the changes in the Low Income Tax Offset from 2009-10 to 2010-11, as detailed in the 2008 Budget.

Gross Income $20,000
Tax in 2009-10 was $2,100 less LITO $1,350 = $750 tax
Tax in 2010-11 it is $2,100 less LITO $1,500 = $600 tax
$150 tax saving or 20.0% reduction from the 2009-10 tax payable.

Gross Income $60,000
Tax in 2009-10 was $11,850 less LITO $150 = $11,700 tax
Tax in 2010-11 it is $11,550 less LITO $300 = $11,250 tax
a saving of $450 or 3.85% reduction from the 2009-10 tax payable.

The ATO has a Low Income Tax Offset calculator available for exact calculations.

Sources:

1 - 8,199
For Books with Free Delivery to Australia: BookDepository UK and USA and Fishpond Australia

2 comments

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