Client Opportunities with LMITO
What does it mean for you and your clients if the government’s budget announcement to more than double the Low and Middle Income Tax Offset (LMITO) from 2018-19 is passed?
Firstly, what is LMITO?
LMITO (sometimes referred to as LAMITO) is an acronym for the Low and Middle Income Tax Offset that the federal government introduced as part of the 2018 Budget. It’s a temporary measure for the four financial years between 1 July 2018 and 30 June 2022. The LMITO is intended to provide tax relief for low and middle-income earners.
Who is eligible for LMITO?
Your eligibility for a full or partial LMITO depends on your taxable income. You’ll be eligible for at least some LMITO if your taxable income for the financial year doesn’t exceed $126,000.
You don’t have to claim the LMITO on your annual tax return. The Australian Taxation Office (ATO) will determine your eligibility and apply the LMITO, if applicable, when they assess your income tax return.
It’s important to understand that LMITO is a tax offset. Tax offsets can only be used to reduce or eliminate your tax liability, they can’t generate you a tax refund. So you can potentially have a tax offset that’s higher than your tax obligation. In that situation, the excess offset can’t be used.
In addition, you can’t use any offset excess to pay your Medicare levy (2% of your taxable income if you aren’t eligible for a Medicare exemption or reduction). In other words, you might have no tax liability after having the LMITO applied on your tax return, but you could still be liable to pay the Medicare levy.
How does LMITO phase in and out
based on taxable income?
The taxable income thresholds for the four financial years the LMITO will be available are outlined in the table below.
|$37,000 or less||$255|
|$37,001 to $48,000||$255 plus 7.5 cents per dollar of your taxable income portion that exceeds $37,000|
|$48,000 to $90,000||$1080|
|$90,000 to $126,000||$1080 less 3 cents per dollar of the portion of your taxable income that exceeds $90,000|
Does LMITO replace the Low Income Tax Offset (LITO)?
No, LMITO does not replace the Low Income Tax Offset (LITO). It will continue to apply for the four years that LMITO will be in operation. Income thresholds and the offset amount available under LITO are scheduled to be adjusted/increased for the 2022/2023 financial year (when the LMITO ceases). These adjustments are intended to lock in the LMITO tax cuts under the single LITO banner.
For the next four financial years (including the current one), taxpayers can potentially be eligible for both the LITO and the LMITO. Your eligibility for LITO is automatically determined by the ATO as part of assessing your income tax return and is applied, as applicable, just like what will happen with LMITO.
How do I find my clients who may be eligible in AdviserLogic?
If you have entered your client income details into the Client Fact Find in AdviserLogic, you can run a database segmentation or search for all clients whose income falls within the above brackets. Armed with this list of clients, you can then send a group mail merge to them explaining the proposed changes and what this means to them.
If you use Mailchimp, have you integrated it with AdviserLogic? This integration allows you to perform your database segmentation to create your list to contact and then send this list into Mailchimp to use for your bulk client communication.
Tracking clients who may do additional business as a result of this marketing campaign
If you email or mail merge from AdviserLogic, a filenote will automatically be attached to each client which you can then report on. Creating a custom fact find field to track those who proceed with additional advice is also another great option.
Is there anyone at AdviserLogic who can help me market to my clients?
The AdviserLogic Consulting team are well placed to assist you with identifying clients for specific marketing campaigns and sending bulk communication to them, tracking responses and reporting.