Low Income Tax Offset 2009-10

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.

For the 2009-10 income tax year, the maximum offset is $1,350. This amount reduces by four cents in every dollar of taxable income above $30,000 until it erodes entirely at $63,750.

Adult taxpayers eligible for the full LITO will not pay tax until until their annual income exceeds $15,000 (up from $14,000 in 2008-09).

Taxable Income LITO Offset
0 – 30,000 $1,350
30,001 – 63,750 $1,350 – [(taxable income - $30,000) x 4%]
63,750 + Nil

Examples

Sarah has a taxable income of just $13,000. Tax on this amount is $1,050. Because Sarah’s taxable income is below $35,000 she is entitled to the maximum low income tax offset of $1,350. This more than covers any tax payable. Sarah should receive back any tax she has already paid.

Kevin has a taxable income of $60,000. Tax on Kevin’s income is $11,850. Kevin is entitled to a low income tax offset of $150. This reduces Kevin’s tax liability to $11,750.*

* 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.

Next Year

From 1 July 2010 the low income tax offset will increase from $1,350 to $1,500. This will effectively provide a tax-free threshold of $16,000 for adult taxpayers and $1,333 for minors.

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.