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Alarm bells in the media could mean angry clients, so tax agents need to explain the change or risk being a target.
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Accountants must alert clients to LMITO, remind them who to blame
12 April 2023
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Accountants must tell their clients how scrapping the low and middle-income tax offset (LMITO) will impact them or risk being blamed for a bigger tax bill, experts say.
Director of tax communications at H&R Block, Mark Chapman, said LMITO was always due to end but many people would be unaware of the consequences.
“The previous Liberal government set up the LMITO to end on 30 June 2022 and legislated that outcome, the current Labor government has stuck to that and confirmed that they have no intention to extend it,” said Mr Chapman.
“Obviously, this isn’t likely to be welcome news to clients – many of whom are facing cost-of-living pressures including increased mortgage rates or rent, increased domestic fuel bills and increased petrol costs.”
“Accountants need to be careful to communicate the change so that clients are aware of the end of the offset and that the blame is firmly placed where it belongs - with the government - and not with accountants.”
Consumers were alerted to the end of LMITO on the weekend when The Sydney Morning Herald reminded its readers LMITO would cease and that the Treasurer would not continue the tax offset which meant costs would rise for more than 10 million middle-income Australians.
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The LMITO had provided eligible individuals earning up to $126,000 a tax offset of up to $1,500 when they lodged their returns, and with it removed taxpayers were set to notice in the form of increased tax liabilities or lower refunds come tax time.
BDO partner Mark Pizzacalla said while the repercussions would be felt broadly the Treasurer had indicated a renewed cost of living relief measures in his upcoming budget.
“Low and middle income taxpayers will certainly feel the impact of the end of the LMITO, particularly for those who were relying on larger tax refunds to offset increasing living costs,” said Dr Pizzacalla.
“The Treasurer has hinted at targeted cost of living relief that won’t add to inflation so the issue is going to be whether such measures will sufficiently compensate taxpayers for the loss of the LMITO.”
Elinor Kasapidis, senior manager of tax policy at CPA Australia, said tax agents and accountants needed to communicate with clients regarding the end of the offsets and dial down possible expectations for a substantial return.
“Some clients may be expecting a larger refund due to the effect of the LMITO in earlier years,” said Ms Kasapidis.
“There have been constant changes to tax rates, offsets and concessions over the past few years, this means tax agents increasingly need to have conversations with their clients to ensure they’re prepared for any changes.”
“We encourage tax agents to discuss tax returns for this financial year and changes coming up next year with their clients.”
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