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Tax Rebates & Offsets

The low income tax offset

As well as there being no tax on the first $18,200 (the tax-free threshold) there is also, to provide a helping hand to taxpayers who earn under a certain amount each year, a low income tax offset (LITO). Being an “offset” 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 the Medicare levy.

The maximum value of LITO is $445, with a reduction mechanism set at a rate of 1.5 cents for each dollar of taxable income over $37,000. No offset will be available if your income exceeds $66,667. Note also that the reduction rate will reduce to 1 cent from July 1, 2015 (however see note re changes below).

LITO does not have to be specifically claimed, because the Tax Office automatically calculates your entitlement in your tax assessment.This may vary if the low income taxpayer becomes or ceases to be a resident part-way through the financial year. LITO is in addition to dependant and all other tax offsets allowed to a taxpayer.

Another way of claiming the LITO is through your PAYG withholding. Individuals eligible for LITO can claim 70% of their LITO entitlement as a reduction in the amount of PAYG withheld from their pay. The remainder of the entitlement is then taken into account in the year-end tax return.

Low income tax offset 2014-15


$0 - $37,000


$37,001 - $66,666

$445 less 1.5% of excess over $37,000

$66,667 and above


The Tax Office has a LITO calculator (click here to access).

Note that as well as the LITO reduction rate changing from July 1, 2015, to 1 cent for each dollar over $37,000, the maximum offset available will also reduce to $300. The cut-out threshold will increase slightly to $67,000. However, in measures associated with the repeal of the carbon tax and consequent removal of 2015-16 tax cuts, the government’s intention is to restore LITO to $445 with a 1.5 cent withdrawal rate from the 2015-16 year.

The tax scale for 2015-16 currently provides a tax cut by the lift in tax free threshold from $18,200 to $19,400, which is partly offset by an increase in the 32.5 cent marginal rate to 33 cents, and the reduction in LITO from $445 to $300. The effect of the repeal of the carbon tax is to revert the 2015-16 tax scale and the LITO to the same rates which have been in place since the 2012-13 year.

Last reviewed 24/07/2014

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