Low Income Tax Offset (LITO) 2026: Thresholds and How Much You Get

You may be eligible for the Low Income Tax Offset (LITO) if you:

• Are an Australian resident for tax purposes
• Pay tax on your taxable income
• Have a taxable income below the relevant thresholds

The maximum offset is $700, but the amount you actually receive tapers down as your income rises through three bands:

Above $66,667, the offset phases out to zero.

If your taxable income is $50,000, you fall into the $45,001–$66,667 band. Your offset is calculated as:

$325 − (1.5 cents × ($50,000 − $45,000)) = $325 − $75 = $250

If your taxable income is $40,000, you fall into the $37,501–$45,000 band. Your offset is:

$700 − (5 cents × ($40,000 − $37,500)) = $700 − $125 = $575

LITO isn't a payment you claim separately. The ATO automatically works out your offset amount after you lodge your tax return, and it appears on your notice of assessment under "less non-refundable tax offsets." This is an important distinction: LITO reduces the tax you owe, but it can only reduce your tax payable down to $0 — it is not refundable, meaning if the calculated offset is larger than the tax you actually owe, you don't get the difference paid to you as a refund. Any unused portion of the offset simply isn't paid out.

A common source of confusion is the Low and Middle Income Tax Offset (LMITO), a separate, larger offset that applied in previous years but ended on 30 June 2022. If you're looking at older tax guidance or comparing your refund to a previous year, LMITO no longer applies for the 2025–26 or 2026–27 financial years — only LITO remains. If your refund looks smaller than a few years ago and you assumed you were still getting "the low income offset," it's worth checking whether you were actually receiving LMITO in that earlier year, since that additional offset is gone.

LITO isn't the only change affecting take-home pay from the 2026–27 financial year. Separately from the offset itself:

• The 16% tax bracket, covering income between $18,201 and $45,000, is being reduced to 15%
• An automatic tax deduction of $1,000 for work-related expenses is being introduced

Combined, these two changes — which are separate from LITO — can mean savings of up to $568 a year for workers earning over $45,000. These changes affect your overall tax bill through the bracket and deduction structure, while LITO continues to apply as a separate offset calculated on top of that.

For someone earning at or below $37,500, LITO delivers the maximum $700 reduction in tax payable, but only if they owe at least $700 in tax before offsets — for very low earners whose tax liability is already close to zero (for example, due to the tax-free threshold), the offset may not deliver its full value simply because there isn't enough tax owing to offset. This is a common point of confusion: LITO reduces what you owe, but it cannot create a refund beyond what you would have paid.

1. Check your taxable income against the three bands above to estimate your LITO amount before lodging.
2. Don't expect a separate payment or line item labelled "LITO payment" in your bank account — it only reduces the tax shown as payable on your notice of assessment.
3. If you're comparing this year's refund to a pre-2022 return, remember LMITO is gone — it's not the same offset, and its absence explains a lower refund even if your income situation is similar.
4. Consider the separate effect of the reduced 16%→15% tax bracket and the new automatic $1,000 work-related expense deduction when estimating your overall 2026–27 tax position, since these apply independently of LITO.

Do I need to apply for the Low Income Tax Offset? No. The ATO calculates it automatically once you lodge your tax return, based on your taxable income.

Can LITO give me a refund larger than the tax I paid? No. LITO is non-refundable — it can only reduce your tax payable to zero, not create a payment beyond that.

Is LITO the same as LMITO? No. LMITO (Low and Middle Income Tax Offset) was a separate, larger offset that ended on 30 June 2022 and no longer applies. LITO is a different, ongoing offset with its own thresholds.