Australia's Low and Middle Income Tax Offset (LMITO) set to expire in 2023
- Arnold Shields
- May 15, 2023
- 2 min read
Updated: May 15
Tax policies shape the economic well-being of individuals and households across Australia. One such policy, the Low and Middle Income Tax Offset (LMITO), provided critical financial relief for millions of taxpayers. Introduced as a temporary measure to support low and middle-income earners, the LMITO delivered tax refunds of up to $1,500 per person.
Why the LMITO Was Introduced
Originally announced in 2018, the LMITO aimed to boost consumer spending and ease cost-of-living pressures. It was a stopgap while the government phased in broader tax reform measures, and over the years it provided between $675 and $1,500 in offsets depending on income levels.
What Changed in 2023
As of 1 July 2022, the LMITO officially ended. That means for the 2022–23 financial year and beyond, the offset will no longer be applied. If you were expecting a tax refund similar to previous years, you may notice a significant difference, particularly if you fall within the low to middle income range ($37,000 to $126,000).
In essence, your tax bill will be higher than in past years, not because your income changed, but because the LMITO no longer cushions your liability.
Example Impact
If you earned $60,000 in 2021–22, you may have received the full $1,500 offset. For 2022–23, without that offset, your refund could be reduced by the same amount, or you might even owe money depending on other factors like withheld tax or additional income.
Why the Offset Ended
The government’s long-term tax plan involves simplifying the tax system and reducing the number of brackets. The LMITO was never permanent, it was always intended to bridge the gap until these broader reforms took effect.
What You Can Do
With the LMITO no longer in place, tax planning becomes even more important. To manage your liability and avoid surprises:
Review your PAYG withholding with your employer
Maximise eligible deductions—such as work-related expenses, home office costs, or superannuation contributions
Seek professional tax advice to optimise your position
At Dolman Bateman, we help clients across Australia understand these changes and take proactive steps to manage their tax outcomes.
Final Thoughts
The removal of the Low and Middle Income Tax Offset marks a shift in tax policy. If you're feeling the pinch in your refund, or facing a bill where you once got a boost, you're not alone. Now is the time to reassess your tax planning strategy for the year ahead.
Disclaimer:
The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. While every effort has been made to ensure the accuracy of this content at the time of publication, tax laws and regulations may change, and individual circumstances vary. Dolman Bateman accepts no responsibility or liability for any loss or damage incurred as a result of acting on or relying upon any of the information contained herein. You should seek professional advice tailored to your specific situation before making any financial or tax decision.
