An increase to the Low Income Tax Offset (LITO) was announced in the 08/09 Federal Budget. For the 2008-09 income tax year, the maximum offset is $1,200. This amount reduces by four cents in every dollar of taxable income above $30,000 until it erodes entirely at $60,000.
Adult taxpayers eligible for the full LITO will not pay tax until their taxable income exceeds $14,000 (up from $11,000). It’s now $2,267 for a child under 18.
|
Taxable Income
$
|
LITO Offset
$
|
| 0 – 30,000 | $1,200 |
| 30,001 – 60,000 | $1,200 – [(taxable income - $30,000) x 4%] |
| 60,000 + | Nil |
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. The Taxation Office have an online Low Income Tax Offset calculator. The 08-09 year is not yet functional from the calculator at the time of writing but I expect it will be come 1 July. The calculator will help you work out whether you are eligible for the LITO and calculates the amount of your offset if your taxable income is less than the low income tax offset threshold.
If you’re doing your own tax, you don’t need to apply for the low income tax offset on your return. The Tax Office will calculate and apply any LITO entitlement for you.
Article by Christie Lewis
Christie is Practice Manager at Alan Lewis Accountants . Besides accounting, her passion is for all things small business (and blogging, of course). You can contact Christie directly at christie@lewistaxation.com.au.
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