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The Low Income Tax Offset (LITO) is designed to provide tax relief for Australian citizens on lower incomes. It helps to reduce your taxable amount and increase your take-home pay. In 2025, LITO continues to support taxpayers by automatically applying to the tax returns. Being aware of its eligibility criteria, income threshold and calculation methods can be helpful for maximising this offset.
In this context, this guide explains how it works, how much offset you can claim under LITO and tips to make the most of this tax offset.
The Low Income Tax Offset (LITO) is a non-refundable tax offset, it is designed to reduce the tax payable for Australian residents with lower incomes. LITO is often applied when taxpayers lodge tax returns Perth, and the tax rebate you claim depends on your income. Full benefits of this offset are available to those who earn less than the threshold and gradually decrease as income rises.
For the 2025 – 26 financial year, the LITO provides a maximum offset of $700 for peoples who earns less than $37,500 per annum. As your income increases, the offset gradually decreases. Here is the quick overview of how LITO works after increasing the threshold:
Once your income exceeds $66,667, the offset is no longer available. It can reduce your tax payable, but won’t result in a cash refund. To get this offset, you don’t need to do anything except lodging your tax return accurately and on time.
The low and middle income tax offset (LMITO) was a temporary tax option designed to provide extra relief for Australian residents who earn moderate incomes. It was associated with LITO to target taxpayers whose earnings were above the LITO threshold but below higher income levels.
This temporary benefit complemented the tax return Perth accountant responsibilities when it was active.
Eligible taxpayers could receive up to $1,500 from the low income super tax offset, depending on their income. The offset was structured to provide maximum benefits for middle income earners. Here’s exactly how it worked for 2021–22 income year:
| Taxable Income | Offset |
| $37,000 or less | $675 |
| From $37,001 to $48,000 | $675 along with 7.5 cents for every dollar more than $37,000, up to $1,500 |
| From $48,001 to $90,000 | $1,500 |
| From $90,001 to $126,000 | $1,500 minus 3 cents for every dollar above $90,000 |
It was also a non-refundable offset, it reduced tax payable but could not generate a cash refund. LMITO ended in the 2022 – 23 financial year. From 2023 onwards, only LITO continues to provide tax relief for low income earners.
LITO and LMITO are both designed to reduce payable tax for Australian citizens. Here is the quick overview of their key differences:
| Feature | LITO (Low Income Tax Offset) | LMITO (Low & Middle Income Tax Offset) |
| Purpose | Tax relief for low income earners | Additional tax relief for middle income earners |
| Maximum Offset | $700 | $1,500 |
| Income Eligibility | Up to $66,667 | $37,000 to $126,000 |
| Full Offset Threshold Range | $0 – $37,500 | $48,000 – $90,000 |
| Phase-Out Rate | 5¢/$ over $37,500, then 1.5¢/$ over $45,000 | 3¢/$ over $90,000 |
| Refundable | No – reduces tax payable only | Same as LITO |
| Application Type | Yes – when lodging tax return | Yes – when it was available |
| Current Status | Active (2025–26) | Ended after 2021–22 |
If you are unsure how either offset may have impacted your situation, reaching out for tax return services can provide tailored assistance.
In order to qualify for LITO, you must meet the following criteria:
Apart from the mentioned criteria, you should also register for GST, as the low income offset can only be available once you start lodging your annual ITR.
Let’s have a look at a few examples to understand how the LITO is calculated on personal income tax returns:
Suppose your annual income from full-time job is $45,000. This amount is $7,500 above the $37,500 income threshold, which means that the full $700 offset starts to reduce.
To calculate your tax offset, multiply $7,500 by 5%:
$7,500 × 0.05 = $375
Next, subtract this amount from the maximum $700 offset:
$700 – $375 = $325
Therefore, your LITO amount will be $325.
If you are earning $52,000, you’re $7,000 over the $45,000. So, you’re starting offset is $325.
Therefore, multiply $7,000 by 0.015%:
$7,000 × 0.015 = $70
Subtract this from $325:
$325 – $78 = $255
Thus, your LITO will be $255.
While LITO is automatically applied during tax lodgement, several common mistakes can create barrier to getting the full benefits:
Tax Return Consultants can help you to receive the accurate LITO by reviewing your taxable income and confirming eligibility. They can help you in identifying deductions or offsets to make sure you get the maximum tax rebate.
Tax accountant Perth can also help you with proper reporting of income consisting of various sources, computing input tax credit or any other tax offset procedures to decrease your taxable income. A consultant can also bring clarity to taxpayers who have multiple income streams, like investments, businesses, or rental income.
Read more: Tax Return Deadlines in Australia
The LITO remains a valuable financing tool for reducing tax payables among low income earners. While it is automatically applied, errors in income reporting or deductions can affect the overall outcome. To avoid such instances, consulting a tax return accountant Perth can ensure accuracy, specifically for those taxpayers who have multiple earning streams. Their expertise can help you claim the full LITO and other applicable offsets, such as input tax credits, efficiently.
