Tax Offsets Australia: LITO, SAPTO and Small Business Offset Guide (2025-26)

Australian tax offsets can make a meaningful difference to your refund or final tax bill, but they are often confused with deductions or rebates. An offset reduces the amount of tax you actually pay, after your taxable income has been worked out. In 2025-26, the main offsets individual taxpayers ask about include the low income tax offset (LITO), the seniors and pensioners tax offset (SAPTO), the small business income tax offset, the zone tax offset, and the low and middle income tax offset (LAMITO). Some of these are still relevant each year, while others have been phased out or only apply in limited situations, so it is important to know which ones actually exist for the 2025-26 income year and how they interact with your return.

The low income tax offset is designed to help people on lower taxable incomes. For 2025-26, the maximum LITO is $700. You generally receive the full offset if your taxable income is $37,500 or less. The offset then reduces by 5 cents for every dollar above $37,500, until it phases out completely at $66,667. LITO is not something you separately claim in most cases; the ATO generally works it out automatically when you lodge your tax return. If you are a low income earner, it is worth checking whether your PAYG withholding was too high during the year, because LITO can reduce the tax you owe and may increase your refund.

SAPTO is another important offset, especially for older Australians who receive an age pension or other eligible income. The offset can reduce tax for eligible seniors and pensioners based on their combined taxable income and rebate income. The amount available depends on your circumstances, including whether you are single or partnered, whether your spouse is eligible, and whether you meet the relevant age and residency tests. For 2025-26, SAPTO may reduce tax by up to the full amount of tax otherwise payable, but it is income tested and can phase out as your income rises. Because the rules are more complex than LITO, taxpayers often need to consider both taxable income and “rebate income” when working out entitlement. The ATO usually applies SAPTO when you lodge, but you still need to make sure your return includes the correct details about your marital status, residency, and income.

The small business income tax offset is available to individuals with business income from an unincorporated small business, such as a sole trader or some trust distributions. In earlier years the offset was widely used, but it has now been phased out and is not available for the 2025-26 income year. That means many small business owners may still remember it, but there is no offset to claim this year under that measure. Even so, sole traders should still keep good records, because deductions, temporary full expensing in prior years, and other business concessions can still affect their overall tax outcome. If you operate through a company, this offset would not have applied to company tax in any case, because it was specifically for individuals.

The zone tax offset is another measure that applies only in limited cases. It is intended for people who live in remote or isolated parts of Australia, including certain areas in the Northern Territory, Western Australia, Queensland and other designated zones. The offset is based on whether you live in a remote zone or a special area and whether you meet the residency requirements. It is not simply about working in a remote location; your usual place of residence matters. The offset can also depend on how long you lived in the zone during the year and whether you receive certain allowances or have a spouse. Because zone boundaries and eligibility rules can be technical, taxpayers in regional and remote Australia should confirm their address and residency position before relying on this offset.

LAMITO, the low and middle income tax offset, is often mentioned in discussions about offsets, but it is not available for 2025-26. It was a temporary relief measure that ended after prior income years, so you should not expect it to reduce tax in the current year. This is a common source of confusion, especially for taxpayers who have been used to seeing it in older tax returns or online articles. If you are checking your tax position for 2025-26, focus instead on offsets that are actually current, such as LITO and SAPTO, and on any specific concessions that apply to your situation. Most offsets are applied automatically by the ATO once you lodge your return, but you still need to report your income correctly and provide accurate personal details so the calculation is right. If you are unsure which offsets apply to you, or you want to make sure your return is prepared correctly, contact SolAeon Tax for tailored advice.