A new non-refundable personal tax offset is due to commence from 1 July 2018, in accordance with legislation passed in June 2018 (TLA (Personal Income Tax Plan) Act 2018).
The Low and Middle Income Tax Offset, or LAMITO, provides taxpayers under $125,333 in taxable income between $0 and $530 in additional tax offsets. The base amount of $200 is available to low income earners for the life of the offset, which is four years. After the four years, the LAMITO base of $200 will be absorbed into the current Low Income Tax Offset.
The proposed changes to LAMITO come from the 2019 federal budget announcement. The announcement has been described as part of a package of three changes, titled “Building on the Personal Income Tax Plan” (Budget Paper No. 2, p 17).
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 law|
|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
maximum at 3c per $1
In both scenarios, taxpayers between $48,000 and $66,667 will have a reduced Low Income Tax Offset with the maximum level of LAMITO.
LAMITO available until 2021/22 income year
The proposed changes announced in the 2019 federal budget only increase the base rate and maximum level of non-refundable offset. There has been no announced change to the length of time the offset is available, which is four years from 2018/19 to 2021/22 financial years.
Beginning with the 2022/23 financial year, the base rate of LAMITO is due to be absorbed with the Low Income Tax Offset. Also announced as part of the overall income tax package, the low income tax offset will increase from $645 to $700 (being the LAMITO change). Further changes to personal tax rates have also been proposed from 2022/23 to 2024/25 income years.
Where clients are requesting information surrounding these proposed changes, and their effect on their tax bill, the following practical tools will be made available:
Worked example: Finding the franking credits sweet spot for the 2018/19 income year
Calculator: How the LAMITO change will look based on taxable income for the 2018/19 income year (coming soon)