Low Income Tax Offset : Maximise Your Refund This Financial Year

If you’re an Australian taxpayer earning a modest income, you could be eligible for a tax break that might reduce how much you owe — or even increase your refund. Meet the Low Income Tax Offset (LITO), a financial incentive provided by the government to lighten the tax burden for low-income earners. Whether you’re filing your taxes for the first time or trying to maximize your return, understanding how this offset works could save you hundreds of dollars.

Let’s break it down so you can make the most of it.

What Is the Low Income Tax Offset?

The Low Income Tax Offset is designed by the Australian Government to reduce the amount of tax payable by individuals with low and middle incomes. It’s applied automatically when you lodge your tax return, so you don’t need to claim it manually.

It’s important to note that LITO is a non-refundable tax offset. This means while it can reduce your tax liability to zero, it won’t result in a cash refund if your tax owed is less than the offset amount.

How Much Can You Get?

The maximum Low Income Tax Offset you can receive is $700. However, the actual amount varies based on your taxable income.

Here’s an overview:

Taxable Income Range	Offset Amount
$0 – $37,500	Up to $700
$37,501 – $45,000	Reduce by 5 cents per $1 over $37,500
$45,001 – $66,667	Reduce by 1.5 cents per $1 over $45,000
Over $66,667	Nil

The offset reduces gradually based on income so the higher your taxable income (within the upper limits), the lower your offset.

Who Is Eligible for LITO?

You’re eligible for the Low Income Tax Offset if:

• You’re an Australian resident for tax purposes
• Your taxable income is below $66,667
• You have earned income through wages, self-employment, or other taxable sources

It applies to individual taxpayers — not businesses or trusts. It’s also worth noting that if you’re eligible, the offset will be automatically calculated by the Australian Taxation Office (ATO) during processing.

For more detailed eligibility guidance, refer to the official ATO resource: https://www.ato.gov.au/Individuals/Income-and-deductions/Offsets-and-rebates/Low-income-tax-offset/

How LITO Works With Other Tax Offsets

If your income also qualifies for other offsets, such as the low and middle income tax offset (LMITO) (if applicable in previous income years), both offsets are calculated and applied sequentially to maximize your benefit.

Here’s how it typically works:

1. Tax is calculated on your taxable income.
2. LITO and any other eligible offsets are subtracted.
3. The result is your final tax payable amount — or a refund if you’ve overpaid during the year.

Keep in mind that LITO cannot be used to reduce your Medicare levy or any outstanding HECS-HELP debts.

Why You Should Care

Even if you’re earning below the tax-free threshold (currently $18,200), combining it with LITO and any other eligible offsets ensures you’re not paying more tax than necessary. For those in the $37,000 to $66,000 range, understanding how the offset phases out can also help with financial planning and salary negotiations.

Key Takeaways

• The Low Income Tax Offset can reduce your tax by up to $700.
• It applies automatically — no separate claim needed.
• It phases out for incomes over $37,500 and cuts off at $66,667.
• You must be an Australian resident taxpayer to qualify.

Understanding tools like LITO can empower you to make smarter decisions about your income, tax obligations, and potential savings. As always, reviewing your tax return thoroughly and consulting a qualified tax agent can ensure you gain the full benefit you’re entitled to.