Millions of Australians will receive a one-off $1500 tax cut – while others will receive a near-instant one-off cash payment of $250, as part of the 2022 Federal Budget.
To assist with the rising cost of living, low and middle income earners will receive a one-off tax offset of $420 - in addition to the existing $1080 offset, bumping the total up to $1500.
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Those earning under $126,000 will be eligible for the offset when they file their tax return this year.
It will be paid alongside the low and middle income tax offset (LMITO) this year – before it is phased out next year.
Treasurer Josh Frydenberg said there were more than 10 million Australians eligible for the offsets.
Motorists are also set for relief at the bowser as the fuel excise tax is slashed.
How much do I get?
- Those earning $37,000 or less, receive an extra $675 is offset in their tax returns.
- Those earning between $37,001 and $48,000 receive between $675 and $1500
- Those earning between $48,001 and $90,000 receive the maximum $1500 offset.
- Those earning between $90,001 and $126,000 receive $1500 minus three cents for every dollar over $90,000.
- Those earning $126,000 or more will not receive the additional $420.
Other than those that do not require the full offset to reduce their tax liability to zero, all LMITO recipients will receive the full $420 increase.
LMITO was initially touted by Mr Frydenberg as “more of their money in their pockets to spend across the economy”.
“LMITO is targeted at low and middle income earners that are most susceptible to cost of living pressure,” the budget papers read.
“The government is responding in a temporary, targeted and responsible way to reduce cost of living pressures experienced by Australian households.”
Is it just a Band-Aid approach?
But with the economy showing signs of recovery from the pandemic and the unemployment rate forecast in the budget to go as low as 3.75 per cent, the scheme will come to an end.
“That was always a temporary measure that was designed as a fiscal stimulus with the economy being hit by the pandemic,” Mr Frydenberg previously said.
Director of Tax Communications at H&R Block Mark Chapman told 7NEWS.com.au the expansion of this year’s offset was welcome - but was disappointed it was a “short-term measure”.
“Unfortunately, this is just a short-term measure.
“Next year, the low and middle income tax offset disappears completely - meaning that people earning up to $126,000 will see a tax rise of up to $1,080.
“It’s hard to see how that will do anything to help cost of living pressures over the medium and long term.”
Mr Frydenberg’s budget also affirmed that stage three of a plan to reshape the tax bracket system would come into effect in the 2024-25 financial year.
It was first introduced in the 2018-19 financial year and touted as a “simpler tax system that rewards workers”.
“When stage three of the plan delivers further tax cuts in 2024-25, around 95 per cent of taxpayers will face a marginal tax rate of 30 per cent or less,” Tuesday’s budget papers said.
“This will simplify the tax system, improve incentives for working Australians and increase reward for effort.”
Wealthy to benefit from future tax cuts
But economists say that wealthy Australians are set to benefit most from the scheme, and young Australians could be left wanting.
LMITO is a part of a three-stage plan introduced in the 2018 federal budget that reshapes Australia’s tax bracket system.
Australia is currently in the second stage.
When the third stage is implemented, the 32.5 per cent tax rate is changed to 30 per cent and the upper threshold is raised from $120,000 per annum to $200,000.
This means that someone on a $45,001-a-year salary pays the same tax rate as someone earning four times as much.
“When a government chooses to spend $15 billion on tax cuts for high-income earners, there’s no doubt it’s chosen to give a far bigger boost to older Australians than to young Australians,” Chief Economist at the Australia Institute Dr Richard Denniss told 7NEWS.com.au.
“There aren’t many Australians in their 20s earning more than $200,000 a year.
“But when the stage three tax cuts come in, people earning $200,000 a year will get a $9000-a-year tax cut.
“That’s a lot of money, and there’s a lot of young people that are struggling to save up for a house, struggling to pay the rent and struggling with high petrol prices.”
$250 payment for millions
Additionally, some six million Australians will receive a one-off, income tax-exempt payment of $250, subject to a stringent criteria.
It will be given to pensioners, carers, veterans, job seekers, eligible self-funded retirees and concession card holders.
The money will be rolled out automatically in April through previously established payment methods.
The budget also notes that payments, including the age pension, disability support pension and carer payment rates increased by about $20 a fortnight for singles and $30 for couples.
A similar increase will occur again in September, it says.
Mr Frydenberg says the measures are designed to “help individuals meet rising cost of living pressures”.
Petrol bowser bonus
Motorists are also set for relief at the petrol pump, with a temporary halving of the fuel excise tax.
The 44.2 cents per litre excise will be slashed in half for six months.
The average retail price of petrol on February 20 was 179.1 cents per litre. Five weeks later on March 20 it was 212.5 cents.
The treasurer says he expects savings be passed on to the consumer in a fortnight.
“This cut in fuel excise, which takes effect from midnight tonight, will flow through to the bowser over the next two weeks,” Mr Frydenberg said.
“The competition watchdog will monitor retailers to make sure these savings are passed on in full.
“This temporary reduction in fuel excise will not come at a cost to road funding, which will see more than $12 billion spent in the coming year.”
The budget predicts that a motorist who fills up a 40-litre tank of petrol each week stands to save $10 in excise and GST per tank, or up to $250 over the six-month period.
Motor industry experts earlier said that cutting the fuel excise tax shouldn’t come at the expense of investing in fuel-efficient vehicles.
“The budget should address the disparate nature of fuel-efficient vehicle incentives, which see every state with different rules,” Pitcher Partners’ Motor Industry Services lead Steven Bragg said.
“Levelling the playing field for Australian motorists with the rest of the world regarding fuel efficient vehicles would deliver long term benefits and decrease dependency on oil price fluctuations.”
https://news.google.com/__i/rss/rd/articles/CBMiamh0dHBzOi8vN25ld3MuY29tLmF1L2J1c2luZXNzL2ZpbmFuY2Uvb25lLW9mZi1jYXNoLXBheW1lbnQtY29uZmlybWVkLWZvci1taWxsaW9ucy1vZi1hdXN0cmFsaWFucy1jLTYyNTA2MjXSAW5odHRwczovLzduZXdzLmNvbS5hdS9idXNpbmVzcy9maW5hbmNlL29uZS1vZmYtY2FzaC1wYXltZW50LWNvbmZpcm1lZC1mb3ItbWlsbGlvbnMtb2YtYXVzdHJhbGlhbnMtYy02MjUwNjI1LmFtcA?oc=5
2022-03-29 19:23:35Z
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