Why you may not get the full $1,080 from the low and middle income tax offset

Many Australians will lower their tax bill for the last financial year with the low and middle income tax offset, however it isn’t a cash bonus as many expect.

Many taxpayers are mistakenly expecting an additional $1,080 bonus with their tax returns this year from the federal government’s 2018-19 tax cuts that were passed earlier this year.

There has been extensive media coverage about the tax cuts, highlighting the 10 million-plus taxpayers who could receive tax cuts of up to $1,080.

Unfortunately, some media outlets haven’t properly explained that the $1,080 measure is a non-refundable tax offset instead of an additional cash amount like the stimulus package cash bonuses sent to Australians in 2009.

The offset depends on income earned in the 2019-18 financial year and has different benefits for the various income groups, meaning few taxpayers can take advantage of the full $1,080.

Additionally, the offset can reduce a taxpayer’s 2019 tax bill, but it will not affect any Medicare liabilities.

What will you get from the $1,080 offset?

Here is a detailed breakdown of how the low and middle income tax offset works and what benefit you are likely to receive from the $1,080 offset:

• If you are earning under $37,000, the maximum benefit you can receive under this new tax offset is $255
• Workers earning between $37,000 and $48,000 will receive $255, plus an amount equal to 7.5% to the maximum offset of $1,080
• Anyone earning between $48,000 and $90,000 will be eligible for the maximum amount of $1,080
• If you are earning more than $90,000 but less than $126,000, the $1,080 you can receive will be reduced by 3% for every dollar over $90,000
• Taxpayers earning more than $126,000 will not receive any of this benefit.

Get the right advice

Clearly, there is much more detail to the low and middle income tax offset than what has been highlighted in the media.

The key points to remember are: the $1,080 offset is an income tax cut rather than a cash bonus and the offset amount may be less than $1,080 depending on income earnt in FY 2018-19.

LDB has a team of expert accountants who provide strategic tax and compliance advice for individuals, businesses and organisations.

If you need guidance on the low and middle income tax offset or other tax issues, just give us a call on (03) 9875 2900 or fill in the form below to speak with one of our experts.