The Low Income Tax Offset (LITO) is available to most Australian tax residents earning under $66,667. Working out whether you qualify is straightforward — eligibility comes down to two tests: tax residency and taxable income. This article walks through the eligibility requirements and common situations.
The Two Eligibility Tests
Test 1 — Australian Tax Residency
LITO is available to Australian tax residents for the full income year. If you are a tax resident for only part of the year (because you arrived in or departed Australia during the year), LITO is pro-rated or may not apply depending on your circumstances.
Non-residents are not entitled to LITO. Non-residents are taxed at different rates and do not have access to the tax-free threshold or most tax offsets.
If you are uncertain about your residency status for tax purposes, the ATO has a residency decision tool at ato.gov.au. Residency for tax purposes is separate from visa status or citizenship.
Test 2 — Taxable Income Under $66,667
LITO phases out progressively between $37,500 and $66,667:
| Taxable income | LITO entitlement |
|---|---|
| $37,500 or less | $700 (full offset) |
| $37,501 – $45,000 | Reduces from $700 at 5 cents per dollar |
| $45,001 – $66,667 | Reduces from $325 at 1.5 cents per dollar |
| Over $66,667 | $0 |
Your taxable income is the figure after all allowable deductions have been subtracted from your assessable income. It is the income figure your tax is actually calculated on.
Common Situations
Full-time employee earning $55,000
Taxable income $55,000. LITO = $325 − 1.5% × ($55,000 − $45,000) = $325 − $150 = $175
Qualifies for partial LITO.
Part-time worker earning $22,000
Taxable income $22,000. LITO = $700 (maximum — income is below $37,500)
Combined with the $18,200 tax-free threshold and Medicare levy low income reduction, this person is likely to pay little or no tax.
Self-employed person with net business income of $80,000
Taxable income $80,000. No LITO — income exceeds $66,667.
Retiree drawing down superannuation
Superannuation pension payments from a taxed super fund for those aged 60 and over are tax-free and not included in taxable income. However, if a retiree has other assessable income (investment income, rental income, part-pension) that brings their taxable income under $66,667, LITO may apply.
Student with part-time income of $15,000
Taxable income $15,000. LITO = $700 (maximum). The $18,200 tax-free threshold means no income tax is payable regardless, but the LITO result is still calculated.
Person working overseas for the full year
If you are a non-resident for tax purposes for the full year, you do not qualify for LITO.
Superannuation and LITO
LISTO vs LITO: The Low Income Super Tax Offset (LISTO) is a separate, unrelated offset of up to $500 that is paid directly into your super fund for low earners. It compensates low-income earners for the 15% tax their employer pays on super contributions (which may be higher than their effective income tax rate). LISTO and LITO are different offsets with different eligibility rules — you may be entitled to both.
LITO and PAYG Withholding
Your employer uses ATO withholding tables that already factor in LITO for employees earning under $66,667. This means the amount withheld from your wages each pay period should already reflect your likely LITO entitlement. At tax return time, the ATO calculates your actual LITO based on your full-year taxable income and reconciles any difference.
If you have multiple jobs or other income sources not captured in PAYG withholding, your actual LITO may differ from what your employer has withheld for, which can result in a tax bill or refund at return time.
Related Articles
- Low Income Tax Offset (LITO) — How It Works
- LMITO Explained — The Offset That Ended in FY2021–22
- Why Did My Tax Refund Drop?
- Tax Offsets hub
- Taxes hub
Frequently Asked Questions
I am on a working holiday visa — do I get LITO? Working holiday makers (subclass 417 and 462) are generally taxed as non-residents for tax purposes and are not entitled to LITO.
Do I need to fill in anything in my tax return to claim LITO? No. LITO is calculated automatically by the ATO based on your taxable income. There is no specific field to complete in myTax for LITO — it is applied as part of the standard tax calculation.
I had a high income for most of the year but resigned. My total income was $40,000. Do I get LITO? Yes. LITO is based on your total taxable income for the full year, not your income at any point during the year. If your full-year taxable income is $40,000, you qualify for LITO of $575 ($700 − 5% × $2,500). If your employer withheld tax at a higher rate (based on annualised salary), you may receive a tax refund when you lodge.
This article provides general tax information only. For advice tailored to your situation, speak with a registered tax agent. Find one through the Tax Practitioners Board register or visit MoneySmart.