Low Income Tax Offset 2006-07

Like all offsets, the Low Income Tax Offset (LITO) reduces the amount of income tax payable on your taxable income.

LITO can only reduce your tax liability to zero and so any unused portion is not refundable or transferable.

To qualify for the low-income tax offset, you must be a resident for tax purposes. You do need to apply for the offset as the Tax Office will automatically calculate it for you when assessing your tax return.

For the 2006-07 income tax year, the maximum offset is $600. This amount reduces by four cents in every dollar of taxable income above $25,000 until it erodes entirely at $40,000.

 

Taxable Income LITO Offset
0 – 25,000 $600
25,001 – 40,000 $600 – [(taxable income - $25,000) x 4%]
40,001 + Nil

 

 

Examples

Susan has a taxable income of just $9,500. Tax on this amount is $525. Because Susan’s taxable income is below $25,000 she is entitled to the maximum low income tax offset of $600. This more than covers any tax payable. Susan should receive back any tax she has already paid.

Ken has a taxable income of $30,000. Tax on Ken’s income is $3,600. Ken is entitled to a low income tax offset of $400. This reduces Ken’s tax liability to $3,200.*

* Note that these calculations do not take into account the Medicare levy. Offsets reduce tax liability but generally do not reduce Medicare.

Online Calculator

The Taxation Office have an online Low Income Tax Offset calculator available.

The calculator will help you work out whether you are eligible for the low income tax offset. It also calculates the amount of your offset if your taxable income is less than the low income tax offset threshold.

This information is for guidance only and is not intended as specific advice to any reader. Professional advice should be obtained before acting on any information contained herein. The publisher accepts no responsibility for loss occasioned to any person or organisation as a result of action or the refrain of action as a consequence of the contents of this publication.