OFFSET, NOT A BRACKET
The low income tax offset.
LITO reduces income tax. It does not reduce the Medicare levy, and it does not create a refund larger than the tax you owed before it.
The maximum is $700 while taxable income is $37,500 or less. From $37,500 to $45,000 it falls by 5 cents per dollar, so $375 of it is gone at $45,000 and $325 remains. Above $45,000 it falls by 1.5 cents per dollar. $325 divided by 0.015 is about $21,667, so the offset reaches zero near $66,667. Someone on $80,000 or $90,000 should expect $0 of LITO. The calculator will show that.
On $40,000 of taxable income the offset is $700 minus 5% of $2,500, which is $575. Income tax before the offset, at the 2026–27 15% rate, is 15% of $40,000 minus $18,200, which is $3,270. Tax after LITO is $2,695, and Medicare is still calculated on $40,000. We do not let the offset eat the levy.
Seniors and pensioners have a separate offset. It is not added here.
Questions
Will LITO give me a refund if I paid no tax?
No. It is a non-refundable offset. It can reduce tax to zero. It cannot pay you the unused part.
Does it apply from 1 July 2026?
The thresholds described here are the ones used with the 2026–27 resident rates on this site. The 15% bracket change does not by itself rewrite LITO.