Low Income Tax Offset Calculator 2026-27

Work out what the low income tax offset is worth on your taxable income for 2026-27, the tax it removes, and why almost none of it shows on a payslip. The offset is up to $700 and runs out at $66,667. It did not change this year, but the tax rate underneath it did.

Your details

Taxable income

Taxable income, after deductions. Not your gross wage.

Low income tax offset

$700.00

Income tax before the offset: $1,770.00
Offset used: $700.00
Income tax after the offset: $1,070.00
Medicare levy, not reduced by the offset: $198.90
Total tax and levy: $1,268.90
Where this income sits: Full offset, at or below $37,500
Rate on the next dollar, taper and levy included: 25.0%

Your payslip will not show this. PAYG withholding is worked out before any offset, so it settles when you lodge your return. Medicare levy thresholds for 2026-27 are the prior year carried forward, as the ATO has not published them.

Worked examples, with the arithmetic.

The same sums the tool runs, on real figures. Every number below is computed by the tested engine from the published rates, so the prose and the tool can never disagree.

What is the low income tax offset worth on $30,000?

$30,000 - $18,200             = $11,800
$11,800 x 15c                 = $1,770.00
low income tax offset         = $700.00
income tax after the offset   = $1,070.00
Medicare levy, not reduced    = $198.90
total tax and levy            = $1,268.90

On $30,000 of taxable income the offset is the full $700.00, because the income is under $37,500. It takes income tax from $1,770.00 to $1,070.00 for 2026-27. The Medicare levy of $198.90 is untouched, so $1,268.90 is owed in total. The same income in 2025-26 owed $1,386.90, so the 1c rate cut is worth $118.00 here.

Where does income tax start once the offset is counted?

$700 / 15c                    = $4,666.67 of income
$18,200 + $4,666.67           = $22,866.67 in 2026-27
$18,200 + $700 / 16c          = $22,575.00 in 2025-26

A $700 offset cancels the 15c tax on the first $4,666.67 above $18,200, so in 2026-27 no income tax is payable until taxable income passes $22,866.67. In 2025-26 that point was $22,575.00. It moved because the rate under the offset fell from 16c to 15c, not because the offset changed. The Medicare levy is separate and starts at $28,011.

Is this accurate, and how does it work?

The method is published rather than described. Nothing here is a black box, and the limits are listed as plainly as the workings.

1Start from taxable income, not wages. The offset is worked out on taxable income, which is income after deductions. From 2026-27 that includes a standard deduction of up to $1,000 for work-related expenses, so a wage earner who claims nothing else has $1,000 less taxable income than the payslip total. Enter the figure after deductions.
2Apply the three bands. Taxable income of $37,500 or less gets the full $700. Between $37,501 and $45,000 the offset is $700 less 5c for every dollar above $37,500. Between $45,001 and $66,667 it is $325 less 1.5c for every dollar above $45,000. Above $66,667 there is none. That is the table in section 61-115 of the Income Tax Assessment Act 1997, and the ATO page states it in the same words.
3Take it off income tax, and stop at nil. The offset reduces income tax only. If the tax is smaller than the offset, the difference is lost: it is not refunded and it cannot reduce the Medicare levy. That is what non-refundable means, and it is why the offset is worth nothing at or below $18,200, the Tax-Free Threshold, where there is no tax to reduce.
4Find where income tax actually starts. In 2026-27 the offset cancels the 15c tax on the first $4,666.67 above $18,200, so no income tax is payable until taxable income passes $22,866.67. In 2025-26, at 16c, that point was $22,575. The offset did not move. The rate under it, the second of the Tax Brackets, did, and that is the whole of the change for people in the offset bands.
5Expect it at assessment, not on the payslip. The withholding schedules the ATO issues to employers are computed before any tax offset, and the withholding declaration that lets an employee claim an offset through payroll has no option for this one. The ATO works the offset out after you lodge, which is why someone on $25,000 to $40,000 who has had tax withheld all year usually sees a refund. The Income Tax Calculator applies it only when you tick the box, for the same reason.

What this does not cover.

It assumes you are an Australian resident for tax purposes for the full year, and that the figure you enter is taxable income after deductions. The standard deduction of up to $1,000 from 2026-27 is for you to net off first.
It does not model the seniors and pensioners tax offset. A person entitled to SAPTO also gets the low income tax offset and a higher Medicare levy threshold, and that combination is worked out on the SAPTO Calculator.
It does not model the cap on the offset for minors with unearned income under section 61-115(2), or the Working Australians tax offset of up to $250 that starts in 2027-28.
It does not show what your employer withholds. The ATO withholding schedules are computed before offsets, so at most incomes in the offset bands the tax on a payslip is higher than the assessed figure shown here. The Weekly Pay Calculator and Fortnightly Pay Calculator leave the offset out, so their per-pay figures sit closer to a payslip.

Where these figures come from.

ATO, Low income tax offset, the source gave its own last updated date as 2026-06-08. Retrieved 2026-09-02.
ATO, Tax rates for Australian residents, the source gave its own last updated date as 2026-08-13. Retrieved 2026-09-02.
ATO, Medicare levy reduction for low-income earners, the source gave its own last updated date as 2026-06-30. Retrieved 2026-09-02. Not yet published for 2026-27: this is the prior year’s figure carried forward and labelled as such, never estimated. It is corrected as soon as the ATO publishes.
ATO, Taxation Administration (Withholding Schedules) Instrument 2026, LI 2026/18, the source gave its own last updated date as 2026-07-01. Retrieved 2026-09-17.
ATO, Withholding declaration, the source gave its own last updated date as 2024-12-11. Retrieved 2026-09-17.
ATO, Multiple jobs or change of job, the source gave its own last updated date as 2026-06-05. Retrieved 2026-09-17.
ATO, Low and middle income earner tax offsets, the source gave its own last updated date as 2025-06-16. Retrieved 2026-09-17.
ATO, Personal income tax: new tax cuts for every Australian taxpayer, the source gave its own last updated date as 2026-05-13. Retrieved 2026-09-17.
ATO, Standard deduction for work-related expenses, the source gave its own last updated date as 2026-09-14. Retrieved 2026-09-17.
ATO, Working Australians tax offset, the source gave its own last updated date as 2026-07-23. Retrieved 2026-09-17.

Every rate this site uses is listed on the Methodology page.

Common questions.

How is the low income tax offset calculated?

In three bands, all on taxable income. Up to $37,500 the offset is the full $700. From $37,501 to $45,000 it is $700 less 5c for each dollar over $37,500, which reaches $325 at $45,000. From $45,001 to $66,667 it is $325 less 1.5c for each dollar over $45,000, which reaches nil at $66,667. On $40,000 that is $700 less $125, so $575. $65,000 a year sits near the end of that third band, where the offset is worth less than a dollar a fortnight, and $70,000 a year is past it.

How much can I earn before paying income tax with LITO in 2026-27?

$22,866.67 of taxable income. The 15c rate on the $4,666.67 above $18,200 produces exactly $700 of tax, which the offset cancels. In 2025-26 the second rate was 16c, so the point was $22,575. The Medicare levy is separate: it starts at $28,011 and the offset cannot reduce it.

Why did I get a refund if I only earn $30,000?

Because your employer withheld tax without the offset and the ATO applied it at assessment. The withholding formulas are computed before any offset, and there is no way to claim this one through payroll. The ATO’s own 2025-26 example is Sue on $26,000: tax of $1,248 less the $700 offset and no Medicare levy, so $548 owed, against $1,716 withheld, a refund of $1,168. Most of the refund people on $25,000 to $40,000 see is this offset arriving late. For your own refund, the Tax Return Calculator nets the offset against your tax withheld.

Can the low income tax offset reduce my Medicare levy?

No. The offset applies to income tax only and can take it no lower than nil. The ATO states that any unused amount cannot be refunded, and the Medicare levy sits outside it. A person on $30,000 in 2026-27 has $1,770 of income tax cut to $1,070 by the offset, and still pays $198.90 of levy on top. Where the levy starts and how it shades in is set out on the Medicare Levy Calculator.

Do I need to claim LITO?

No. The ATO works it out when you lodge your tax return, and there is no box to tick. You cannot claim it early through your employer either: the Withholding declaration’s offset question covers the invalid and invalid carer offsets, the zone and overseas forces offsets, and the seniors and pensioners tax offset. The low income tax offset is not on it. What a zone offset claimed that way takes off each pay is worked out on the Zone Tax Offset Calculator. It reaches you only through a lodged return, and Tax Return Deadline 2026 sets out when a 2025-26 return is due.

What happened to the low and middle income tax offset?

LMITO ended. The 2021-22 income year was the last one it applied to, so it was last claimed in returns lodged in 2022 and is not available for 2023 onwards. A page that still shows an offset of up to $1,500 is describing LMITO. The low income tax offset is a separate, older offset and is still in place.

Does LITO change in 2026-27?

No. The $700 maximum, the $37,500 and $45,000 thresholds and the $66,667 cut-out are the same as in 2025-26. What changed is the tax underneath it: the second bracket rate fell from 16c to 15c, and from 1 July 2027 it falls again to 14c, which on an unchanged offset moves the zero-tax point to $23,200. Two other things arrive alongside it. A standard deduction of up to $1,000 for work-related expenses applies from 2026-27 and lowers taxable income before the offset is worked out, and a separate Working Australians tax offset of up to $250 starts in 2027-28. Neither is modelled here.

Does a part-year resident get the low income tax offset?

Yes. Section 61-110 of the Income Tax Assessment Act 1997 gives the offset to an individual who is an Australian resident at any time during the income year, with taxable income of $66,667 or less. This calculator assumes a full year of residency and a full year of income, so a part-year figure needs the ATO calculator or a tax agent. A foreign resident for the whole year is not entitled.

Related pages.

Income Tax CalculatorWork out income tax, the Medicare levy and the low income tax offset on any salary for 2026-27, with the bracket-by-bracket working shown.
Tax BracketsThe 2026-27 resident income tax brackets and the tax payable at each threshold, sourced from the ATO with the date it last changed.
Weekly Pay CalculatorWork out weekly take-home pay from an annual salary, with income tax and the Medicare levy shown as separate weekly amounts.
Fortnightly Pay CalculatorWork out fortnightly take-home pay from an annual salary, with income tax, the Medicare levy and super shown separately.

Every calculator on this site is listed on the Wage Calculator page.