Where did my refund go?? The Low and Middle Income Tax Offset has ended
Taxpayers earning up to $126,000 will get smaller tax refunds or tax payable in 2023. The low and middle income tax offset (LMITO) ended in the 2022 tax year.
The LMITO, introduced in 2018-19, provided tax relief to help balance the tax creep which forces workers into higher tax brackets. The temporary tax cut was designed to support those earning up to $126,000. The greatest benefit of $1500 went to people earning between $48,000 and $90,000 in 2021-22. There is no sweetener on offer from the government or ATO – simply higher tax to go with higher interest rates.
A Low Income Offset (for those earning less than $66,667 per year) and a Seniors and Pensioners Tax Offset remain in place. The amount of each offset is variable dependent on income and is automatically calculated in the tax return for eligible tax payers.
Looking ahead, Stage 3 Tax cuts are still legislated but not guaranteed for implementation in July 2024.
Stage 3 tax cuts were designed to simplify the Australian tax system and combat tax bracket creep by reducing the number of tax brackets.
If Stage three tax changes are legislated, there would be 3 main tax brackets. Earnings between $18,201 and $45,000 taxed at 19%, $45,000 to $200,000 at 30% and $200,000+ at 45%. In a strange decision for a a Labor government in a period of cost of living pressures the biggest winners of the transition from LMITO to Stage 3 Tax Cuts are the high income earners.
However Stage 3 Cuts are not a done deal. They are legislated to commence, however we remain cautious of a backflip in next year’s Federal Budget.
For this year we expect higher tax payable / smaller refunds than in previous years. If you are not happy, we wish we could do more but this is out of our hands. Speak with your local member of Parliament. If you need further taxation advice you can contact us or book an appointment via our website.
