Aussies earning less than $126,000 a year will be hit with a tax hike starting next year thanks to a small detail hidden in the Federal Budget.
The low and middle income tax offset (LMITO) came to an end on June 30, 2022 and Labor’s Budget will not reinstate it.
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“The last year of the tax offset – which gives low- and middle-income earners up to $1,500 in tax back – was 2022,” H&R Block director of tax communications Mark Chapman said.
“When you do your tax return for 2023, the absence of the offset effectively means that you will be paying more tax.”
Stage 3 tax cuts to go ahead
The Labor Government also stuck to its plan to go ahead with the stage three tax cuts that were legislated under the former Morrison government.
The stage-three tax cuts will flatten the tax rate for people earning between $45,000 and $200,000 to 30 per cent.
This means everyone who earns between those amounts will all be taxed at the same rate and the existing tax bracket for those earning between $120,000 to $180,000 will be removed.
The top tax threshold will also be lifted to above $200,000.
Currently, these tax cuts are set to occur in July 2024.
Going ahead with the stage three tax cuts in 2024 is estimated to cost the Budget a massive $184 billion over 10 years.
Under the plan, more than half a million high-income earners in Australia will get a tax break amounting to around $9,075 a year.
However, while around 600,000 high-income earners are set to benefit from the tax cuts, there are many middle-income earners who will also see a boost.
Independent economist Chris Richardson said the impact of the stage three tax cuts on fairness was overblown.
Richardson said the tax changes would make little difference to the proportions of tax paid by higher-income earners.
"Although stage three does benefit the top 10 per cent, it actually delivers tax cuts to the top 78 per cent of taxpayers," Richardson wrote on Twitter.