Low income tax offset (LITO) 2026-27
The low income tax offset (LITO) is worth up to $700 in 2026-27 for taxable incomes of $37,500 or less, then shrinks to nil at $66,667. See the ATO low income tax offset page (opens in a new tab). This calculator shows your offset and the tax left after it. On $41,000, LITO is $525.
The link carries the numbers you entered, so anyone who opens it sees the same result.
Low income tax offset
$525
Breakdown
| Income tax before offsets | $3,420 |
|---|---|
| Low income tax offset | $525 |
| Income tax after LITO | $2,895 |
| Medicare levy | $820 |
| Total tax | $3,715 |
- Income tax before offsets
- $3,420
- Income tax after LITO
- $2,895
- Medicare levy
- $820
- Total tax
- $3,715
- Take-home pay
- $37,285
- Unused offset
- $0
- Position
- First phase-out
Key insights
- You get $525. The offset falls by 5 cents for each dollar of income above $37,500.
- With LITO, you pay no income tax until your taxable income passes $22,866 in 2026-27.
Up to $700, then reducing above $37,500
LITO has three ranges. You get the maximum up to $37,500, then two phase-out rates bring it down to zero.
| Taxable income | LITO |
|---|---|
| $37,500 or less | $700 |
| $37,501 to $45,000 | $700 minus 5c for every $1 above $37,500 |
| $45,001 to $66,667 | $325 minus 1.5c for every $1 above $45,000 |
| $66,667 and above | Nil |
How $41,000 gets to a $525 offset
A resident with taxable income of $41,000 is $3,500 above $37,500, so the offset falls by $3,500 × 5c = $175, leaving $525. Income tax before offsets is $3,420 ($22,800 at 15%). After LITO it's $2,895, and the 2% Medicare levy of $820 brings the total to $3,715.
On the same income in 2025-26 the total was $3,943, so the 15% rate saves this earner $228.
| Taxable income | LITO | Income tax before LITO | Offset actually used |
|---|---|---|---|
| $20,000 | $700 | $270 | $270 |
| $30,000 | $700 | $1,770 | $700 |
| $37,500 | $700 | $2,895 | $700 |
| $41,000 | $525 | $3,420 | $525 |
| $45,000 | $325 | $4,020 | $325 |
| $50,000 | $250 | $5,520 | $250 |
| $60,000 | $100 | $8,520 | $100 |
| $66,667 | $0 | $10,520 | $0 |
The first phase-out is steep. Between $37,501 and $45,000, every extra dollar costs 5 cents of offset on top of 15% tax, so the effective rate is 20% before the Medicare levy. The second range is gentler: the offset falls by $15 for each extra $1,000, so at $55,000 it's $175.
Deductions inside the first range are worth more than the tax rate suggests. A $2,000 deduction at $41,000 cuts income tax by $300, adds $100 to LITO and trims the levy by $40, a saving of $440. The marginal tax rate calculator shows the full effect at any income.
The real tax-free threshold once LITO is applied
With LITO, a resident pays no income tax on taxable income up to $22,866 in 2026-27. The $18,200 threshold is the headline figure, and the offset covers the 15% tax on the next $4,666.
The exact sum is $18,200 + ($700 ÷ 15%) = $22,866.67, so tax first appears from $22,867. Spread over a full year, that's about $440 a week.
By contrast, a full-time worker on the national minimum wage of $1,004.90 a week earns $52,254.80 a year, and keeps only $216.18 of LITO.
The Medicare levy runs on its own threshold. Under the latest announced (2025-26) figures, a single person pays no levy up to $28,011, so someone earning $25,000 pays $320 of income tax and no levy.
| Step | Amount | Running total |
|---|---|---|
| Tax-free threshold | $18,200 | $18,200 |
| Covered by the $700 offsetAt 15% | +$4,666 | $22,866 |
| No income tax up to | $22,866 | |
- Threshold in 2025-26When the rate was 16%. The rate cut lifted it by $291.
- $22,575
- Threshold from 1 July 2027When the rate falls to 14%, as long as LITO stays at its current level.
- $23,200
LITO cannot create a refund by itself
LITO is non-refundable. It can reduce income tax to zero, but any part of the $700 left over is lost.
At $20,000 of taxable income, tax before offsets is $270. LITO wipes that out, and the other $430 of the offset isn't paid to you.
LITO also can't be used against the Medicare levy, and unlike SAPTO, an unused amount can't be transferred to a spouse.
Where refunds actually come from
Refunds come from tax withheld during the year. A $41,000 salary paid weekly has $80 withheld each week, $4,160 over the year, against an assessed $3,715. The $445 difference comes back after lodging, and LITO is one reason the assessment is lower than the withholding.
Who misses out on LITO
Anyone with taxable income of $66,667 or more gets nothing. Between $45,001 and $66,666 the amount is small: $100 at $60,000 and just $10 at $66,000.
People whose income is under $18,200 get no practical benefit, because they have no income tax to offset. Seniors may get more through the separate Seniors and Pensioners Tax Offset, which the SAPTO calculator estimates alongside LITO.
Foreign residents and working holiday makers
LITO is for Australian residents for tax purposes, so foreign residents don't get it. They also have no tax-free threshold, so their tax starts at 30% from the first dollar.
Working holiday makers are taxed under their own scale from the first dollar. A working holiday maker who's a foreign resident for tax purposes can't get LITO. The ATO says one who's an Australian resident from a non-discrimination agreement country (opens in a new tab) may be eligible.
The working holiday maker tax calculator applies the 15% rate from $1 to $45,000.
What the LITO calculator does not cover
The calculator assumes a full-year resident and a single taxable income figure. It doesn't apply other offsets, such as SAPTO or the private health insurance rebate, which can change how much of LITO is used.
It doesn't model the family Medicare levy thresholds or a HELP repayment. Income from a business, trust or capital gain counts towards taxable income and so reduces LITO, even though the calculator takes only the final total.
LITO questions: what it is, the end of LMITO, claiming and part-year income
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Last reviewed
What is the low income tax offset?
It's a reduction in income tax for residents on lower incomes. In 2026-27 it's $700 for taxable income up to $37,500, falls to $325 at $45,000, and reaches nil at $66,667. It reduces income tax only, not the Medicare levy, and can't be paid out as a refund on its own.
Why was the low and middle income tax offset removed?
The low and middle income tax offset (LMITO) was designed as a temporary measure with a set end date, and the government didn't continue it after that date. The ongoing low income tax offset of up to $700 continues. From 2027-28, workers can also receive the new Working Australians Tax Offset of up to $250 a year.
Do you have to claim LITO?
No. There's no label to fill in and nothing to ask your employer for. The ATO works out the low income tax offset from your taxable income when it processes your return. On $41,000 in 2026-27 it applies $525 automatically, and the result shows on your notice of assessment.
Do you get LITO if you only worked part of the year?
Yes, and it often helps. LITO is based on taxable income for the whole year. Someone earning $1,500 a week for 20 weeks has $30,000 of income and the full $700 offset. Their employer withheld $5,980, but assessed tax is $1,268.90, so about $4,711 comes back if nothing else changes.
Estimates only, based on published rates for 2026-27. General information, not tax or financial advice.
Keep going
Sources
- ATO: Low income tax offset (opens in a new tab)
- ATO: Tax rates, Australian residents (opens in a new tab)
- ATO: Working Australians Tax Offset (opens in a new tab)
- ATO: Taxation of Australian resident WHMs from NDA countries (opens in a new tab)
- ATO: Low and middle income earner tax offsets (opens in a new tab)
Provisional: the Medicare levy low-income thresholds ($28,011 and $35,013) are carried over from the previous financial year until the ATO publishes the 2026-27 figures.