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taxes

Tax tips for low income earners

By Jessica Holmes

Published on June 12, 20242 min read

If you’re earning a low income in Australia, you may be entitled to a few tax benefits. First, you’ll need to determine your taxable income for the financial year. From there, you can see if you’re eligible for the low income tax offset and/or the low income superannuation tax offset. You’ll might also be able to claim tax deductions to help lower your taxable income. Let’s break it down.

What income is taxable?

According to the Australian Taxation Office (ATO), assessable income is income that you need to pay tax on, provided you earn over the tax-free threshold. This income is usually made up of:

Salary and wages
Tips, gratuities and payments for services
Some allowances
Interest from banks accounts, dividends and investment income
Bonuses and overtime payments and commissions
Pensions
Rent

Tax offset

If you earn less than $66,667 per year and are an Australian resident, you may be eligible for the low income tax offset. Currently, the maximum tax offset of $445 applies if your taxable income is $37,000 or less, this amount is then reduced by 1.5 cents for each dollar over this amount.

The best part? This is not an offset you have to claim. When you submit your tax return, the ATO will automatically work it out for you.

Tax deductions

In order to reduce the amount of income tax you are required to pay, you can also take advantage of tax deductions. There are so many deductions to consider, from vehicle and travel expenses, to clothing and laundry, self-education or even home office expenses. However, always keep in mind that you can only claim deductions that are work-related.

If you’re a university student, you may be able to claim deductions such as course and tuition fees, stationary and textbook costs, and equipment depreciation.

Keep in mind that the ATO will require a record to prove all your tax deductions, including receipts. It may be worthwhile getting an accountant involved to help you correctly claim your deductions.

Low income super tax offset

The purpose of the low income super tax offset, commonly referred to as the LISTO, is to ensure low income earners do not pay more tax on their super contributions then on their take-home pay where possible.

If you earn $37,000 or less a year, you may be eligible to receive a LISTO payment, up to $500, directly to your superannuation account. The good news is you don’t have to do anything to receive the LISTO, simply make sure you super fund has your tax file number on hand.

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