Are you eligible for a tax offset?

If you are an Australian resident for income tax purposes and you pay tax on your taxable income, you may be eligible for both the low and middle income tax offset.

This graph from the ATO gives an indication of how the tax offsets could work for you based on your income.

But what is a tax offset?
A tax offset means you pay less tax (also known as your tax payable) on your taxable income (that is, your total income minus any deductions).

This tax offset can only reduce the tax you pay to zero, so if your taxable income is $18,200 or less and you haven’t paid any tax, an offset can’t reduce the tax you pay, as your tax payable amount is already zero.

But, if have paid any tax on this income, you will generally receive all of this tax back as a refund – your tax payable amount is zero so no offset can be applied.

If your taxable income is $18,201 or more, the ATO uses your taxable income to work out how much tax you’re required to pay.

There are two types of tax offsets

Low income tax offset
The maximum low income tax offset is $445. If your taxable income is $37,000 or less you will get the full offset of $445. The low income offset amount is then reduced by 1.5 cents for each dollar over $37,000.

Low and middle income tax offset
This tax offset could be added to the low income tax offset depending on your income. The low and middle income tax offset amount is between $255 and $1,080.

The full offset is $1,080 per annum, but you might not be entitled to the full $1,080. The base amount is $255 per annum.

The amount of offset you receive depends on your circumstances, such as your taxable income and how much tax you have paid.|

No extra forms to fill out
You don’t need to complete anything in your tax return in order to access the low or low and middle income tax offset. The Tax Office works out the amount of this tax offset for you once you lodge your tax return.

If you receive a tax refund it will be deposited into your nominated bank account. Any refund may also be reduced by any debt you have with the ATO or any Australian government agency, as the law requires them to use refunds or credits to pay debt.

Please Note: Offsets also can’t reduce your Medicare levy and Medicare Levy Surcharge (if any). The Medicare levy is 2% of your taxable income, in addition to the tax you pay on your taxable income.

To see if you are eligible for these Tax Offsets, please contact us on (07) 3804 7575, or just go online and make an appointment. We can explain how it works when you come in to see us.