Australia · 2026-27
The low income tax offset, 2026-27
The low income tax offset takes up to $700 off the tax a resident owes. It is the full $700 up to $37,500, shrinks by 5c for each dollar to $45,000, then by 1.5c for each dollar until it reaches nothing at $66,667. It can only reduce tax to nil: it is never paid as cash.
The offset at 11 taxable incomes
| Taxable income | Offset available | Tax before offset | Offset used | Tax payable |
|---|---|---|---|---|
| $20,000 | $700.00 | $270.00 | $270.00 | $0.00 |
| $22,866 | $700.00 | $699.90 | $699.90 | $0.00 |
| $30,000 | $700.00 | $1,770.00 | $700.00 | $1,070.00 |
| $37,500 | $700.00 | $2,895.00 | $700.00 | $2,195.00 |
| $40,000 | $575.00 | $3,270.00 | $575.00 | $2,695.00 |
| $45,000 | $325.00 | $4,020.00 | $325.00 | $3,695.00 |
| $50,000 | $250.00 | $5,520.00 | $250.00 | $5,270.00 |
| $55,000 | $175.00 | $7,020.00 | $175.00 | $6,845.00 |
| $60,000 | $100.00 | $8,520.00 | $100.00 | $8,420.00 |
| $66,667 | $0.00 | $10,520.10 | $0.00 | $10,520.10 |
| $70,000 | $0.00 | $11,520.00 | $0.00 | $11,520.00 |
Offset available is what the ATO's schedule allows at that income; offset used is limited by the tax owed. Between $37,500 and $66,667 the shrinking offset adds to the effective rate on a pay rise (5c or 1.5c for each dollar on top of the 15c or 30c tax rate and the Medicare levy). The tax rates guide has the bands.
Questions
How much is the low income tax offset in 2026-27?
Up to $700. If taxable income is $37,500 or less you get all of it; between $37,501 and $45,000 it is $700 minus 5c for every dollar over $37,500; between $45,001 and $66,667 it is $325 minus 1.5c for every dollar over $45,000.
Why do I pay no tax on slightly more than $18,200?
Because the offset cancels the tax. At $20,000 the tax is $270.00, which is less than the $700 offset, so nothing is payable. Tax payable stays at nil up to $22,866 and only then begins.
Do I have to claim it?
No. The ATO works the offset out when you lodge your tax return and shows it on your notice of assessment. You do not apply for it separately.
Does it affect what my employer withholds?
The ATO's weekly withholding scale for people who claim the tax-free threshold does not include the offset, so the tax withheld during the year can be higher than the assessed tax; the difference comes back as part of your refund. This site shows the assessed amount.
More Australian guides
Estimates for the 2026-27 financial year using rates read from the ATO on 2026-10-03. Assumes an Australian resident for the whole year. Not payroll, tax or financial advice.