What Do You Know About The Governments Personal Low Income Tax Offset?

Low Income Tax Offset

Well firstly,  in Australia the financial year runs from July 1st to June 30th of the following year. You may know Income tax in Australia is the most important revenue stream within the Australian taxation system. Generally, income tax is levied on three sources of income for individual taxpayers.

1. Personal earnings, such as salary and wages.
2. Business income and
3. Capital gains

Collectively these three sources of income tax account for 66% of federal government revenue and 57% of total revenue across the three tiers of government.  Income received by individuals is taxed at progressive rates, while income derived by companies is taxed at a flat rate of 30%. Generally, capital gains are only subject to tax at the time the gain is realised. Income tax is collected by the Australian Taxation Office for the Government.

Income tax is applied to the taxable income of a taxable entity. Taxable income is calculated, in a general sense, by applying allowable deductions against the income of a taxable entity.

However, there is also the Low Income Tax Offset to consider. From 1 July 2010, the LITO  will increase from $1,350 to $1,500, while at the same time the upper income limit threshold will increase from $63,750 to $67,500. The offset will continue to phase out at a rate of 4 cents in the dollar in excess of $30,000.

The ATO website has further details, but you certainly need to know if you’re currently earning less than $67,500 that the offset applies to you.