Clarke McEwan Accountants
So, what are you really entitled to?
The recent income tax cuts that passed through Parliament do not mean everyone automatically gets $1,080 back from the Government as soon as they lodge their income tax return. The Australian Taxation Office (ATO) has been inundated with calls from taxpayers wanting to know where their money is and how they can access the $1,080 they now believe is owing to them.
The first thing to remember is that this is a tax offset; you need to owe tax to offset the tax.
And, if you owe tax, the offset will be first used to reduce the tax you owe. It is not a cash back – a point the ATO is at pains to point out stating on its website that, "It doesn't mean that you will get an extra $1,080 in your tax return."
From 1 July 2018, a low and middle income tax offset (LMITO), first introduced in the 2018-19 Federal Budget, provides a tax benefit to those with taxable incomes below $125,333. Recent changes increase the LMITO from a maximum of $530 to $1,080 and the base amount from $200 to $255, and make it applicable to a greater number of taxpayers by increasing the threshold from $125,333 to $126,000.
The offset applies for a limited time. In this case, the offset applies to the 2018-19, 2019-20, 2020-21 and 2021-22 income years. So, if you are eligible to receive the offset, it applies to the taxable income you earned last financial year (2018-19) and you will receive any offset owing once you have lodged your tax return.
Taxable income* |
Offset minimum |
Offset maximum |
<$37,000 |
$255 |
$255 |
>$37,000 - <$48,000 ** |
$255 |
$1,080 |
>$48,000 - <$90,000 |
$1,080 |
|
>$90,000 - <$126,000 *** |
$1,080 |
|
$126,000+ |
$0 |
$0 |
* Your taxable income is the income you earn less any deductions you claim - not your salary.
** offset entitlement is $255, plus 7.5% of the excess to a maximum of $1,080.
*** offset entitlement is $1,080, less 3% of the excess on taxable income above $90,000.
If you earned taxable income in 2018-19 of:
The LMITO is in addition to the existing low income tax offset (LITO). The LITO is available to those with taxable income of less than $66,667. The maximum offset is $445 for those with taxable incomes of $37,000 or less. Any amount you earn above $37,000 up to the threshold of $66,667 reduces the offset by 1.5%. Once again, the LITO is a tax offset to reduce the amount of tax you pay. If you do not pay personal income tax, you do not receive the offset as a cash refund.
Still need more information? See our article http://www.clarkemcewan.com.au/clarke_mcewan_articles/tax-cuts-pass-in-parliament
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