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Firms need to alert clients or they will get blamed for a “tax increase”, a webinar warns.
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Accountants ‘in firing line over end to LMITO’
06 April 2022
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Accountants should start an information campaign about the end of the LMITO or risk being blamed by clients for the absence of a refund, said ChangeGPS.
In its post-budget webinar, the Brisbane practice said it is vital to act now because many who get LMITO this year will feel the sting of losing it.
The low and middle income tax offset – LMITO, or “Lamington” as it is known – was increased in last week’s budget by $420 for the current income year.
The move means some eligible individuals will benefit by $1,500 in their 2021-22 tax return, or up to $3,000 for couples.
The benefit applies to taxpayers with incomes below $126,000 and the government said the initiative is a “temporary, targeted and responsible way to reduce cost of living pressures experienced by Australian households”.
Introduced in 2019, the LMITO discontinues after this financial year and that could come as a shock to many who previously qualified, said ChangeGPS chief executive David Boyar and executive director Tim Munro, who jointly hosted the webinar.
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“You need to plan and set the client’s understanding of this now, otherwise next year when they don’t get it, they’re going to be unhappy,” they said.
Mr Boyar said accountants needed to arm themselves for calls from clients who might blame them for “increased tax”.
“For clients who are getting it, that’s $1,500 they’re not going to get. Those clients … are going to notice they’re paying for tax when this is removed in 2023,” Mr Boyar said.
“It’s ok to remind your clients why this came in. This came in as a short-term measure to manage bracket-creep.”
He said it was always designed to be a bridging strategy while the government took time to permanently sort out the tax tables – widening the brackets and simplifying the system by reducing the number of brackets.
“It was always meant to be temporary,” he said. “Tell your clients this! They have to know it was temporary.
“Your job as a tax agent is to point the finger where it needs to be pointed: it’s not you, it’s not the Tax Office, it’s government policy. You’re just lodging the return.
“You’ve got to protect yourself from being blamed for increasing tax payments. The only way this happens is if you proactively communicate this to your clients.”
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