LITO (Low Income Tax Offset)

The Low Income Tax Offset is a non-refundable tax offset that directly reduces the tax you owe, not your taxable income. The maximum offset is $700 for incomes up to $37,500, then it tapers - first by 5 cents per dollar of income above $37,500 (down to $325), then by 1.5 cents per dollar above $45,000, fully phasing out at $66,667. Investors with negatively geared properties sometimes find their lower taxable income drops them into the LITO band, which can increase the effective tax saving from the geared loss. Unlike a deduction, the offset can't reduce your tax below zero - you don't get a refund of unused LITO.