Are you earning a low income and wondering if you’re entitled to any tax relief in 2025? The Australian Taxation Office (ATO) offers a special tax offset called the Low Income Tax Offset (LITO) that could help reduce the amount of tax you owe.
Whether you are lodging your tax return in Melbourne online, working with a tax accountant, or simply curious about your tax obligations, this guide will explain what LITO is, how much you can get, and who qualifies.
What is the Low Income Tax Offset (LITO)?
To assist low-income taxpayers with reducing their tax burden, a non-refundable tax offset has been created. Although it lets you pay no taxes, it won’t give you a cash refund like a refund credit would.
If your tax liability is less than or equal to the offset amount, your total tax payable will be reduced, but you won’t receive a cash refund.
How Much is the LITO in 2025?
In the fiscal year 2025, you will be able to receive up to $700 in LITO. However, the actual amount you receive depends entirely on your taxable income.
Here’s how it breaks down:
The entire $700 offset is available if your income is less than $37,500.
- If your income is between $37,501 and $45,000, each dollar over $37,500 lowers your offset by 5 cents.
- Each dollar over $45,000 further reduces by 1.5 cents of your offset
- If your income is more than $66,667, you will not be eligible for this LITO.
LITO Calculation Examples
Let’s look at a few practical examples to help you understand:
Example 1: Income of $36,000
The entire $700 offset will be given to you because your income is less than $37,500.
Example 2: Income of $42,000
You’re $4,500 over the $37,500 threshold.
So:
$4,500 × 0.05 = $225
Offset = $700 – $225 = $475
Example 3: Income of $50,000
You’re $5,000 over the $45,000 threshold.
So:
$5,000 × 0.015 = $75
Offset = $325 – $75 = $250
Eligibility Criteria for LITO
To qualify for Low Income Tax Offset in 2025, you must:
- Be an Australian resident for tax purposes
- Have a taxable income under $66,667
- Submit your tax return for the current year.
- Have some tax payable (LITO only reduces tax payable, not Medicare levy or HECS/HELP debt)
If you meet these conditions, the ATO will automatically calculate and apply the LITO to your return.
How Do You Receive the Offset?
You don’t need to apply separately for LITO. When you file your tax return in Melbourne, it is computed automatically, regardless of whether you:
- Lodge yourself through myGov
- Use a registered tax agent in Melbourne
- Use a personal accountant
Your Notice of Assessment will show the offset amount under “Less non-refundable tax offsets.”
Is LITO a Refundable Payment?
No, LITO is not refundable. That means it:
- Can reduce your tax payable to $0, but
- If your tax is already zero, you are not entitled for a refund.
If your taxable income is very low and you’ve had little or no tax withheld from your wages, LITO may not give you any additional benefit.
What If You’re Eligible for Multiple Offsets?
You might occasionally qualify for both the
- Low Income Tax Offset (LITO) and
- The Low and Middle Income Tax Offset (LMITO) may be reinstated if it is returned in the budget; however, it ceases in 2022–2023.
You can reduce your tax payable with both offsets. Refunds are not available.
How to Make Sure You Get LITO To ensure you receive the correct offset:
To ensure you receive the correct offset:
- Lodge tax online in Melbourne accurately and on time
- Report all income correctly
- If you’re not sure, use a reputable tax agent or a qualified tax accountant in Melbourne
- Use the ATO’s online calculators to check your estimated refund
If you’re using a tax specialist in Melbourne or lodging online with the assistance of KPG Taxation, you will get the full benefit of any offsets you’re entitled to.
Why You Should Work With a Tax Accountant in Melbourne
Even though LITO is auto-calculated, your overall tax position may involve other factors—like:
- Work-related deductions
- Medicare levy reductions
- Other offsets or rebates
- Investment income
- HECS/HELP debt
To maximize your refund or lower your tax liability, a licensed tax return accountant in Melbourne can help you complete your return correctly the first time and find additional qualified deductions.
Conclusion
In conclusion, low-income tax offsets (LITOs) are valuable tools for those earning low incomes in Australia. It provides a maximum benefit of $700, which can reduce your tax bill significantly, particularly if you earn less than $45,000 per year.
Even though LITO is straightforward, getting professional help can ensure your entire return is accurate and optimized.
Need Help with Your 2025 Tax Return?
At KPG Taxation, our best tax agents in Melbourne make tax time easy and flawless. Whether you’re a student, part-time worker, or full-time employee, we’ll help you lodge tax online, check your eligibility for LITO, and find every deduction you deserve.
Book a consultation today or file your tax return in Melbourne online with ease and confidence.
