Low income tax offset explained

An offset reduces tax after it is calculated

The calculator first works out tax using the resident income bands. It then applies the available low income tax offset, limited to the income tax it can reduce.

That is different from a deduction, which changes taxable income before the rates are applied. The engine applies the supported standard deduction automatically for the selected year; other deductions are outside this release.

The amount depends on income

The available offset tapers as taxable income increases and eventually reaches zero. Within the supported profile, the tool works out that amount automatically from the selected year’s rules.

The ATO also determines eligibility when processing a tax return. There is no separate payment promised by the offset shown in this estimate.

A non-refundable offset has limits

The offset can reduce income tax to zero; an unused amount does not become a refund and does not reduce Medicare levy. Any tax refund also depends on withholding and the rest of your tax return.

Other offsets are outside the current calculator. If you receive eligible government payments, have pension-related entitlements or claim another offset, this salary-only result may not describe your final position.

Common questions