Key Takeaways:
- LMITO was a non-refundable offset that reduced income tax for eligible low- and middle-income Australians.
- LMITO ended on 30 June 2022, making 2021–22 the final eligible income year.
- Current alternatives include LITO, relevant tax offsets, and lower rates introduced through later tax reforms.
- The ATO calculated LMITO automatically, and eligible late 2021–22 returns may still receive it.
Low and middle income tax relief once helped millions of Australians reduce their tax payable. The temporary LMITO supported eligible taxpayers during several income years, particularly amid rising living costs.
Although the offset has ended, its rules still matter for older returns and tax comparisons. This article explains what LMITO was, who qualified, how it worked, and which alternatives remain.
What is the ATO Low and Middle Income Tax Offset?
The Low and Middle Income Tax Offset, or LMITO, reduced Australians’ tax payable after applying the tax-free threshold. The Australian Government introduced the offset in 2018, providing tax relief for low and middle income earners.
It formed part of the Personal Income Tax Plan and applied through 2021–22. Unlike a tax deduction, LMITO did not reduce a taxpayer’s taxable income. Instead, the non-refundable tax offset reduced calculated tax, potentially increasing an eligible tax refund.
However, LMITO was not a government payment, and the ATO never refunded any unused amounts. The Australian Taxation Office calculated each offset amount after taxpayers lodged their tax returns.
Is LMITO Still Available in Australia?
No, LMITO is no longer available for current Australian income tax returns. The offset ended on 30 June 2022, making 2021–22 the final eligible financial year. Accordingly, it does not apply to the 2022–23 income year or any later period. Australians lodging a 2026 tax return cannot include LMITO as a current entitlement.
However, the ATO may still calculate the offset for an eligible, outstanding 2021–22 return. Taxpayers should distinguish LMITO from the separate Low Income Tax Offset, or LITO. Eligible residents may still receive LITO under current rules when they lodge their tax return.
Who Was Eligible for LMITO?
Formerly, LMITO applied to Australian residents whose taxable income remained below the prescribed threshold. Eligibility depended primarily on residency status, taxable income, and the relevant financial year.
The offset amount changed across income bands, with some middle-income earners receiving the maximum. Additionally, taxpayers needed tax payable because this non-refundable offset could not create standalone government payments for eligible taxpayers.
Taxable Income and Residency Requirements:
An individual generally needed Australian residency for tax purposes during the eligible financial year. The former Low and Middle Income Tax Offset covered taxable income up to $126,000.
Taxpayers earning above that threshold received no LMITO, regardless of their tax rate. Because residency rules can vary, taxpayers should confirm their position using the ATO residency guidance.
LMITO Eligibility by Income Range:
For 2021–22, each income band determined the applicable ATO tax offset amount. This table shows how taxable income affected an eligible taxpayer’s final LMITO entitlement.
| Taxable income | LMITO |
|---|---|
| $37,000 or less | $675 |
| $37,001–$48,000 | $675 plus 7.5 cents for each dollar above $37,000, capped at $1,500 |
| $48,001–$90,000 | $1,500 |
| $90,001–$126,000 | $1,500 minus 3 cents for each dollar above $90,000 |
| Above $126,000 | No LMITO |
How Much Was the LMITO Worth?
During 2021–22, the Low and Middle Income Tax Offset provided up to $1,500. The Federal Budget added a one-off $420 cost-of-living amount to the previous maximum of $1,080. Accordingly, each eligible Australian received an offset based on taxable income and applicable thresholds.
The offset reduced the amount of tax payable, although it could never create a separate payment. Earlier income years generally offered lower maximum amounts under the Personal Income Tax Plan.
Example LMITO Calculations:
An eligible Australian earning $45,000 exceeded the $37,000 threshold by exactly $8,000. Applying the seven-and-a-half-cent rate to $8,000 produced $600, raising the $675 base to $1,275.
Conversely, a taxpayer earning $100,000 exceeded the $90,000 upper threshold by exactly $10,000. The ATO reduced $1,500 by $300, producing a final offset amount of $1,200.
How Was LMITO Claimed?
Eligible taxpayers did not submit a separate LMITO claim or complete an additional tax schedule. Generally, you needed to do nothing except lodge your tax return with accurate income details. The ATO then calculated the offset using taxable income, residency status, and the applicable income year.
Afterwards, the notice of assessment listed LMITO among the taxpayer’s non-refundable tax offsets. The offset reduced income tax payable before the ATO determined any final tax refund. However, taxpayers still needed supporting records for income, deductions, and other claims within their return.
Was LMITO Paid as a Separate Refund?
LMITO was not a separate payment, cash bonus, or guaranteed tax refund. Instead, the offset reduced the taxpayer’s income tax liability after the ATO calculated taxable income.
When withholding exceeded the final amount of tax payable, LMITO could increase the resulting refund. Conversely, when a taxpayer owed money, the offset could reduce the outstanding tax bill.
Because LMITO was non-refundable, the ATO could only reduce eligible income tax to zero. Taxpayers could not cash out, transfer, or carry forward any unused offset amount. Accordingly, individual circumstances determined whether LMITO changed a refund or reduced higher tax payable.
Can You Still Receive LMITO on an Older Tax Return?
Yes, an eligible taxpayer may still receive LMITO when lodging an outstanding return for 2021–22. Eligibility depends on circumstances during that income year, including residency and taxable income.
The Australian Taxation Office calculates the offset after processing the late tax return. However, LMITO remains unavailable for 2022–23 and every later financial year, including 2026.
Taxpayers should check records carefully because late lodgment may trigger penalties or overdue tax obligations. Accordingly, receiving the offset does not erase other debts, interest, or compliance issues. A registered tax agent can assess unusual cases involving previous years or missing information.
Lodging a Late 2021–22 Tax Return:
Someone lodging a late 2021–22 tax return may receive LMITO if every original eligibility condition applies. The ATO assesses the person’s taxable income, Australian residency, and entitlement for that financial year.
However, taxpayers should lodge promptly because the ATO may apply a failure-to-lodge penalty. Any resulting tax refund may also offset existing government debts before reaching the taxpayer.
Amending a Previous Tax Return:
Individuals generally have two years from the day after the ATO sends their assessment notice. Some taxpayers have four years, so confirm the applicable period with the Australian Taxation Office. Taxpayers should retain income statements, deduction receipts, and other records supporting the requested correction.
However, different time limits may apply when the ATO issued or amended an assessment. A registered tax agent can help when deadlines expired, records remain incomplete, or taxation issues overlap.
Why Did Some Tax Refunds Fall After LMITO Ended?
Some Australians received smaller refunds after LMITO ended because the government removed that offset. During 2021–22, eligible low and middle income earners could receive up to $1,500. From 2022–23, the ATO no longer reduced their tax payable through LMITO. Consequently, unchanged salary, deductions, and withholding could still produce a lower tax refund.
Some taxpayers instead faced a larger bill because their employer withheld insufficient tax through PAYG withholding. The Stage 3 tax cuts changed tax rates from 2024, but they did not restore LMITO. Accordingly, bracket creep, other offsets, debts, and personal circumstances could further change each outcome.
What Is the Difference Between LMITO and LITO?
LMITO and LITO are separate tax offsets serving different income ranges and eligible years. Although both reduce tax payable, only LITO remains available under current Australian taxation rules.
| Feature | LMITO | LITO |
|---|---|---|
| Name | Low and Middle Income Tax Offset | Low Income Tax Offset |
| Status | Ended after 2021–22 | Currently available |
| Income threshold | Below $126,000 | Up to $66,667 |
| Maximum | $1,500 during 2021–22 | $700 |
| Claiming | ATO calculated after lodgment | ATO calculates after lodgment |
| Purpose | Temporary tax relief | Ongoing low-income tax concession |
What Tax Relief Is Available to Low- and Middle-Income Earners Now?
Although LMITO ended, low- and middle-income earners may still qualify for other Australian tax relief. The Low Income Tax Offset remains the main income-based concession for eligible residents. Additionally, current tax brackets can affect take-home pay and the final amount of tax payable.
Other offsets depend on age, government payments, location, family circumstances, or specific expenses. However, none directly replaced the former Low and Middle Income Tax Offset.
The Low Income Tax Offset:
The Low Income Tax Offset remains available to an eligible Australian resident earning up to $66,667. The ATO calculates LITO automatically after the taxpayer lodges an income tax return.
Taxpayers earning up to $37,500 can receive the maximum $700 offset under current rules. Above that threshold, the offset amount gradually falls until entitlement reaches zero. Because LITO is non-refundable, it can only reduce tax payable to zero.
Other Tax Offsets and Current Income Tax Rates:
Australian residents may qualify for other tax offsets, including seniors, pensioners, beneficiaries, or remote-area concessions. Eligibility depends on personal circumstances, so taxpayers should review the ATO’s official offsets directory.
Additionally, the ATO publishes current individual income tax rates for every taxable-income bracket. The Stage 3 tax cuts changed rates from 2024, while further reforms affected later income years. These measures altered tax liabilities but did not replace LMITO or restore its former entitlement.
FAQs
Why Didn’t I Receive LMITO on My Tax Return?
You cannot receive LMITO after 2021–22 because the offset ended on 30 June 2022. For earlier years, income above $126,000 or non-residency could remove eligibility entirely. LMITO also could not exceed tax payable, since the offset remained non-refundable. Check your notice of assessment, which lists eligible amounts under non-refundable tax offsets.
Could LMITO Reduce the Medicare Levy?
No, LMITO could not reduce the Medicare levy or Medicare levy surcharge. The non-refundable offset applied only against income tax calculated from taxable income. However, separate Medicare levy reductions or exemptions may apply when taxpayers meet specific conditions.
Did the ATO Calculate LMITO Automatically?
Yes, the ATO automatically calculated LMITO after an eligible taxpayer lodged the relevant tax return. Taxpayers did not submit a separate claim or calculate the offset amount themselves. Afterward, the notice of assessment displayed LMITO among the taxpayer’s non-refundable tax offsets.
The Bottom Line
Low and middle income tax relief through LMITO gave eligible Australians meaningful support until 2021–22. The offset reduced tax payable, but it never operated as a separate government payment. LMITO ended after that income year, although qualifying late returns may still receive the entitlement.
Eligible residents can now consider LITO, other tax offsets, and current individual income tax rates. Because circumstances vary, taxpayers should confirm each claim through current ATO guidance or professional advice. Which available tax offset could reduce the amount of tax payable on your next return?