There has been a lot of talk and confusion in the media over the past weeks about the Governments additional tax refund for all taxpayers for the year ended 30 June 2019. Is it a refund? Is it an offset? Is it a bonus?
The final legislation has now passed through parliament. The methodology for the treatment and calculation has now been confirmed.
The tax saving has been given the title “Low and Middle Income Tax Offset” (LMITO). A tax offset reduces the amount of income tax you have to pay. It is not a refund.The maximum LMITO offset an individual is entitled to is limited to $1,080. The amount of the offset available to reduce your basic tax liability is determined from your taxable income and is calculated as follows:
This is in addition to the Low Income Tax Offset.
Practically speaking, how will this affect your tax return for the financial year ended 30 June 2019? We provide some examples in the following table:
Note the following
Person A: Salary and wage earner with a few work related tax deductions
Person B: Salary and wage earner with work deductions and a negatively geared rental property investment
Person C: Salary and wage earner with work deductions and share investments