Proposed increase for individual tax offsets
With the 2019 federal budget, the treasurer announced that the federal government intends to increase the low and middle income tax offset (LAMITO).
If enacted, the increase would begin in the current 2018/19 income year. The announcement also confirms that the LAMITO would only run for four years, from the 2018/19 to the 2021/22 income year.
The table of the current law next to the proposed changes, as it relates to the 2018/19 and following income years, is below:
|
Taxable income |
Current law |
Proposed change |
|
Less than $37,000 |
$200 |
$255 |
|
Between $37,000 and $48,000 |
Increase 3c per $1, capped at $530 |
Increase 7.5c per $1, capped at $1,080 |
|
Between $48,000 and $90,000 |
Maximum $530 |
Maximum $1,080 |
|
Between $90,000 and $126,000 |
Reducing from maximum at 1.5c per $1 |
Reducing from maximum at 3c per $1 |
|
Above $126,000 |
$0 |
$0 |
In both scenarios, taxpayers between $48,000 and $66,667 will have a reduced Low Income Tax Offset with the maximum level of LAMITO.
At this stage, the proposed changes are at announcement phase and have yet to be introduced into parliament. However, it has been stated by the current federal opposition that they intend to legislate the proposed change.
We will keep you informed of any changes as they are announced.
If you have any questions, please do not hesitate to contact us.
Norman Ruan
Accountant
T: 02 9984 7774
E: normanr@northadvisory.com.au
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Cayle Petritsch - Director & Wealth Advisor
Cayle Petritsch, Director and Wealth Advisor, works with our existing clients who have recognised the importance of business owners making strategic financial choices not only for their company, but for their personal finances too.
Cayle saw a great opportunity to expand North Advisory’s services into SMSF/superannuation, personal wealth management, asset protection services and other crucial personal finance facets that business owners need to consider.
His approach to wealth management allows you to receive highly personalised wealth advice. Working closely with Marius, Cayle understands the unique needs of every client, from their lifestyle and business goals to their retirement plans.
Key Takeaways
The proposed increase to LMITO aims to lighten the tax burden for low- and middle-income earners,
providing meaningful offset relief especially for those at the lower end of the income scale.
The boost to offsets is time-limited —
this is not a permanent structural tax cut, but a temporary benefit over a defined four-year period.
Benefit mainly for low- to mid-income taxpayers; high earners are excluded —
the offset phases out for higher-income individuals, meaning the measure targets relief where it’s most likely needed.
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Frequently Asked Questions
What is being proposed in the tax-offset changes?
The proposal increases the amounts available under the LMITO — effectively boosting the offset for low-to-middle income earners. For example, the base offset for those earning under ~A$37,000 would increase, and the maximum offset for mid-income bands would rise.
Who benefits from the increased offset under the proposal?
Individuals on low to middle incomes are the target beneficiaries — those earning across the lower and middle-income brackets (up to around A$126,000) stand to gain the most from the offset increase.
When would the increased offset apply?
If legislated, the increase would take effect in the 2018/19 income year and remain in place for four years — through to the 2021/22 income year.
Will high-income earners benefit from this offset?
No. The proposed offset increase phases out for higher incomes; those above the top threshold (above around A$126,000) would not receive the benefit.
Is the offset permanent under the proposal?
No — the uplift to the LMITO is temporary under the plan. It is set to run only for a limited period (2018/19 to 2021/22) unless further extended or replaced by new measures.
What is the proposed increase to individual tax offsets and how does it affect my tax?
The proposed increase to individual tax offsets means eligible taxpayers may receive higher offsets that reduce their tax payable, potentially lowering their overall tax bill. These changes are designed to increase tax relief for low- and middle-income earners, making more of their income tax-free or reducing what they owe in tax.
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