Tax and Income

What Is Low Income Tax Offset (LITO)?

A non-refundable tax offset for low and middle income earners in Australia that reduces the amount of income tax payable. The maximum LITO for 2025/26 is $700.

Definition

The Low Income Tax Offset (LITO) is a non-refundable tax offset available to Australian residents with taxable income below $66,667. The maximum LITO is $700 for incomes up to $37,500. It phases out at 5 cents per dollar between $37,500 and $45,000, then at 1.5 cents per dollar between $45,000 and $66,667, reducing to nil above $66,667. LITO effectively raises the tax-free threshold from $18,200 to approximately $21,885. Being a non-refundable offset, it can reduce tax to zero but does not create a refund. LITO is automatically factored into PAYG withholding tables. The Low and Middle Income Tax Offset (LMITO) was a temporary supplement that ended in 2021/22.

Formula

LITO = $700 for income up to $37,500; reduces by 5c per $ from $37,500 to $45,000; then reduces by 1.5c per $ from $45,000 to $66,667

Example

A $35,000 taxable income earns the maximum LITO of $700, reducing income tax from $3,192 to $2,492 (before Medicare Levy).

Use It

Try the Australian Income Tax Calculator

Related Terms

PAYG WithholdingAustralia's pay-as-you-go tax withholding system. Employers withhold income tax from employees' wages each pay period and remit it to the ATO on the employee's behalf.Medicare LevyA 2% tax on taxable income that funds Australia's public health system (Medicare). Low-income earners may be fully or partially exempt. High earners without private hospital cover pay an additional Medicare Levy Surcharge (MLS) of 1-1.5%.HECS-HELP DebtAn Australian government student loan scheme (Higher Education Contribution Scheme / Higher Education Loan Program) that defers tuition fees, repaid via the tax system once income exceeds the repayment threshold.
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