Post-election: What can your clients expect regarding LMITO?

Now that the government is unchanged, one proposed change contained in the recent federal budget that will most likely be given priority is the increase to the low and middle income tax offset (LMITO).

The previously proposed (and legislated) LMITO, applying for the 2018-19 to 2021-22 income years, is to be increased. This will change the maximum amount from $530 to $1,080 a year for singles and the base amount will increase from $200 to $255 a year for the 2018-19, 2019-20, 2020-21 and 2021-22 income years.

As a result, the LMITO will now provide a reduction in tax of up to $255 for taxpayers with a taxable income of $37,000 or less. For taxable incomes between $37,000 and $48,000, the value of the offset will increase at a rate of 7.5 cents per dollar to the maximum offset of $1,080.

As a result, taxpayers with taxable incomes between $48,000 and $90,000 will be eligible for the maximum offset of $1,080. For taxable incomes between $90,000 to $126,000 the offset will phase out at a rate of 3 cents per dollar.

It is intended that the LMITO will be received on assessment, after individuals lodge their tax returns for the relevant  income years. 

The windfall however may depend on the government being able to secure the support of the Senate before the end of June. 

The ATO has already warned the legislation must be passed before it will make any administrative changes to the existing low- and middle-income tax offset. In an announcement made before the election, the ATO said its role is to administer tax and super laws “as they stand”. In a statement issued after the budget, the ATO said: “The ATO requires law in order to deliver the measure as announced, and as such cannot be delivered administratively.”

The newly re-instated government is of course keen to make the change happen in the time left of the 2018-19 income year. Tax & Super Australia will report developments as they come to hand.

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