2022 Tax Calculator: Tax relief design after 2022 Australian Federal Budget included LMITO payments of $1,500

The main measure in Tuesday night’s federal budget was a one-time cost-of-living tax relief for millions of Australians.

Low- and middle-income earners will get a boost of up to $1,500 when they file their taxes this year — but those at the bottom end of the scale will get less than half.

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The $1,500 is actually a combination of two offsets: the Low and Middle Income Tax Offset (LMITO) and a one-time tax offset of $420 for the same group of earners.

LMITO was introduced in the 2018-19 fiscal year budget and was extended twice during the pandemic.

But that will end after this year’s tax season.

This compensation gives low- and middle-income people compensation of up to $1,080 – but is reduced based on a taxpayer’s income.

  • Those earning $37,000 or less receive $255 compensation under LMITO
  • Those earning between $37,001 and $48,000 receive $255, plus 7.5 cents for every dollar over $37,000, capped at $1,080.
  • Those earning between $48,001 and $90,000 receive the full $1080.
  • Those earning between $90,001 and $126,000 receive $1,080 minus three cents for every dollar over $90,000.

This compensation is in addition to the one-time payment of $420.

Those earning more than $126,000 will receive neither the LMITO nor the one-time cost-of-living compensation.

Tax compensation for low and middle incomes explained. Credit: australian tax office

The tax offsets are temporary and will not return next year.

“A one-time cost-of-living flat rate is a badly applied band-aid,” said Dr Kathy Edwards of RMIT.

“It will not solve the rising costs of essentials such as food, energy and fuel, let alone touch the sides of existing inconveniences.

“It’s hard to see this as anything more than a splash of cash meant to woo voters but not address systemic disadvantage.”

Josh Frydenberg's latest budget has had a mixed reception.
Josh Frydenberg’s latest budget has had a mixed reception in the states. Credit: AAP

Tax experts also lamented the temporary nature of the offsets.

“Unfortunately, this is only a short-term measure,” said Mark Chapman, head of tax communications at H&R Block.

“Next year, the tax offset for low and middle incomes will disappear completely, which means people earning up to $126,000 will see a tax increase of up to $1,080.

“It’s hard to see how this will do anything to help mid to long-term cost of living pressures.”

Commuters in Sydney.
LMITO, or Lamington as it has been dubbed, will cost taxpayers $7.8 billion. Credit: AAP

Prime Minister Scott Morrison said on Wednesday Sunrise that the cost of living measures were designed to be temporary because the budget was in better shape than expected.

“We know that the cost of living pressures, the impact on fuel prices caused by things far, far away from Australia with the terrible war in Ukraine (require) immediate cost of living relief for them,” he said. .

“But responsible cost-of-living relief, as the budget has turned around.”

To calculate exactly how much tax you should pay on your salary, you can use the ATO tax calculator here.

Eleanor C. William