Blog

Money Doesn’t Come Without Guidance ...

WHAT IS LOW INCOME TAX OFFSET?

Awesome Image
23
May

Low Income Tax Offset (LITO) refers to the amount which is subtracted from, an individual’s tax payable. An Individual can claim for tax offset, if he/she is a low-income earner; for instance, Part-time Worker. If the LITO is greater than his/her tax payable, then the excess amount is not refundable and thus it cannot be used as Medicare Levy.
As per the Australian Tax Office, if an individual’s income is between $0 to $18,200 (Tax-free threshold) he/she does not have to pay tax. Nonetheless, LITO provides help to the taxpayers who earn a certain amount each year.
LITO’s maximum value is $445; with a reduction method set at a rate of 1.5% for each dollar of taxable income over $37,000. If individual’s income exceeds $66,667, no offset will be available.

 

 

   Taxable Income         Low income tax offset 2015-16
           $0 - $37,000        $445 less 1.5% of excess over $37,000
       $66,667 and above                              Nil

 

 

As Tax Office automatically calculates the claim on individual’s tax valuation, LITO does not have to be claimed specifically. However, if a low-income earner becomes or terminates to be a resident partway through the financial year, this claim may differ. In addition, dependent and all other tax offsets are allowed to a taxpayer in LITO.
Alternatively, LITO can also be claimed through an individual’s PAYG (Pay As You GO) withholding. Individuals’ who are eligible for LITO can claim 70% of their LITO entitlement as a reduction in the amount of PAYG withheld from their pay. The remainder of the entitlement is subsequently taken into account in the year-end tax return.


Comments 0

    Currently, there are no comment.

Login to comment

Latest Posts

Popular Post

We provide the fastest, easiest and most effective online tax return solution

trustedsite