In our August 2019 newsletter, we mentioned the new Low to Middle Income Tax Offset (LMITO), with a non-refundable tax offset of $1080 for those earning between $48,000 to $90,000 per annum in taxable income.
There has been a little bit of confusion from some people, thinking it’s an automatic $1080 tax refund for all low to middle-income earners. If you aren’t paying any tax in 2019, you won’t get a $1080 tax refund use of the LMITO, because it’s non-refundable. You only get a reduction of any income tax payable, down to $0.
With the passage of the Low to Middle Income Tax Offset, John Frydenberg (Federal Treasurer of Australia), was reported as saying he hoped that taxpayers would pass much of the cash they receive straight into the tills of their local stores, which he thought would eventually result to a boost in the economic activity in the country.
However, analysts from National Australia Bank and the Australian Financial Review were of the opinion that the scheme will not have much effect on the economy.
Morgan Stanley said, “Consumers are using tax and interest rate cuts to pay down record levels of household debt rather than splurge on consumer goods and services, worsening the retail downturn and limiting any economic boost”.
For most people, with the stagnation in many workers’ pay scales, it may indeed be more practical to prioritize debt reduction, remembering that in retirement, paying off a mortgage can make retirement financially stressful.
