Low Income Tax Offset (LITO)
A non-refundable tax offset of up to $700 for individuals with taxable income below $66,667.
The Low Income Tax Offset (LITO) is a non-refundable tax offset that effectively reduces the tax payable by low- and middle-income earners. For 2025–26, LITO provides up to $700 for individuals with taxable income up to $37,500. It phases out at a rate of 5 cents per dollar between $37,500 and $45,000, then at 1.5 cents per dollar between $45,000 and $66,667, reducing to zero at $66,667.
Combined with the tax-free threshold, LITO means that residents earning up to $21,884 pay no income tax at all (before Medicare levy). LITO is automatically calculated by the ATO when your tax return is assessed — you don't need to claim it separately. However, it is not factored into PAYG withholding tables during the year, which is why many low-income earners receive a refund when they lodge their return.
Because LITO is non-refundable, it can only reduce your tax to zero — it cannot generate a cash refund on its own. However, it can work in combination with refundable offsets like franking credits. For example, if LITO reduces your tax to zero, any remaining franking credits would still be refunded.