Tax cuts and concessions have been a massive focus in this year’s Budget with Treasurer Josh Frydenberg chasing down growth and jobs.
As such, Aussies will have more money in their pockets come tax time with measures set to save the average Aussie $1,080 per year through the extension of the low to middle income tax offset (LMITO) for another year.
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The LMITO is awarded to Aussies earning below $125,000, and offers tax offsets of up to $1,080 for singles and $2,160 for dual income couples into next year.
The LMITO was scheduled to expire in 2021-22, with its extension set to cost the Government $7.8 billion.
Treasury estimates that extending the LMITO will boost GDP by around $4.5 billion in 2022-23 and will create an additional 20,000 jobs by the end of 2022-23.
The Government’s Personal Income Tax Plan, introduced in 2018, delivered tax cuts of up to $7,020 for individuals and $14,040 for couples over the four years to 2021.
How does the $1,080 tax offset work?
While not money directly given as a tax refund, the $1,080 offset means Aussies pay less tax.
Around 10.2 million Aussies will benefit from retaining the offset for another year, after it was extended in last year’s Budget.
Australians are also set to benefit from an additional $25.1 billion in tax cuts that were announced in previous Budgets.
Stage 3 tax cuts, which some experts expected to be brought forward, will remain on schedule to be introduced in 2024-25.
Stage 3 means all Aussies earning between $40,000 and $200,000 a year will face the same marginal tax rate of 30 per cent.
“We’re abolishing a whole tax bracket,” Frydenberg said.
“Stage 3 locks in the LMITO long term. So, the Coalition has legislated around $300 billion in tax cuts in the last four Budgets.”
“This year’s LMITO is designed as a stimulus measure, because we’re not out of the pandemic yet and we need to boost demand.”
The Government said this move will increase competition and boost economic growth.
“Australia’s economic recovery is now well underway, and we must keep the momentum going,” Frydenberg said.
“In last year’s Budget, we promised hard-working Australian’s tax cuts and we delivered. We promised the largest ever set of investment incentives and we delivered. We promised more jobs and we delivered.”
Frydenberg said that whilst Australia’s recovery has been positive, so long as COVID exists the Government will continue to focus on growth.
“Under the Coalition, taxes will always be lower and hard-working families better off,” Frydenberg said.
“More of their money in their pockets to spend across the economy, creating jobs.”