Yahoo Finance Major tax change for 10 million Aussies
Aussie earning less than $126,000 will be up to $1,500 worse off come tax time.
More than 10 million Aussies will cop an effective tax hike, following the expiration of the low and middle income tax offset (LMITO).
Treasurer Jim Chalmers will not extend the tax offset in May’s federal budget, according to reports by The Sydney Morning Herald and The Age.
The tax offset was initially introduced as a temporary measure under the Turnbull government in the 2018-19 financial year, as stage one of the government’s original three-stage tax overhaul.
Also read: Major tax change for wealthy Aussies
Also read: ATO's massive tax change for Aussies working from home
Also read: These Aussies may soon be hit with much higher taxes
The LMITO was never designed to be a permanent tax offset, but was extended three times during COVID and to help ease cost-of-living pressures.
The former Coalition government decided to increase the LMITO during last year’s federal budget, increasing the offset from a maximum of $1,080 to $1,500 - an extra $420.
What does it mean for your tax?
The LMITO came to an end on June 30, 2022, and Labor’s upcoming federal budget will not reinstate it.
Under the previous rules:
People earning $37,000 or less received $675
People earning between $37,001 and $48,000 received between $675 and $1,500
People earning between $48,001 and $90,000 received the full $1,500
People earning between $90,001 and $126,000 received $1,500 minus 3 cents for every dollar of the amount above $90,000
The decision to not extend the tax offset means those earning $50,000 will be 3.4 per cent - or about $29 - worse off per week. While someone earning $90,000 will face a 2.1 per cent pay cut. A person on $100,000 will be $1,200 worse off.
The federal government is still planning to implement the controversial stage three tax cuts, introduced by the former Morrison government.
Due to come into effect in July 2024, the tax cuts will flatten the tax rate for people earning between $45,000 and $200,000 to 30 per cent. The existing 37 per cent marginal tax bracket for those earning $120,000 to $180,000 will be removed.
Follow Yahoo Finance on Facebook, LinkedIn, Instagram and Twitter, and subscribe to our free daily newsletter.
