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Budget 2022: 10 million Aussies to get extra $420 cash bonus

·Personal Finance Editor
·2-min read
Budget 2022: Treasurer Josh Frydenberg and Australian currency.
10 million Aussies are set to get the tax bonus as part of the Federal Budget. (Source: AAP/Getty)

Millions of Australians will benefit from additional tax relief as part of the Government’s Federal Budget.

Around 10 million Aussies will get an extra $420 worth of tax relief this financial year as part of the Government's efforts to offset the rising cost of living, the ABC reported.

Treasurer Josh Frydenberg will announce an increase to the low and middle income tax offset (LMITO) for those earning less than $126,000 a year.

Currently, the LMITO gives those eligible an offset between $255 and $1,080 come tax time, but that will increase to between $675 and $1,500 from July 1.

What is the LMITO

The tax cut was first introduced by Scott Morrison in 2018 when he was still treasurer.

It was introduced as the first step in a controversial multi-stage tax reform that would ultimately see an entire tax bracket abolished so taxpayers earning between $40,000 and $200,000 a year would face the same marginal tax rate of 30 per cent.

The LMITO was stage one in the three-part plan and was designed to give low- and middle-income earners immediate tax relief.

It was initially meant to be abolished before stage two because other changes to the tax system would see low- and middle-income earners pay less tax, cancelling out the tax relief created by LMITO.

But the pandemic threw these plans off course. In 2021, the Coalition agreed to extend the LMITO to help stimulate the economy during COVID.

So, with the stage-two cuts brought forward in 2020, this meant abolishing the LMITO would amount to people earning less than $120,000 paying more tax.

As many commentators have pointed out, what would have effectively amounted to a tax hike for low- and middle-income earners would not have been politically palatable in the lead-up to an election.

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