Low, middle-income Australians earning $48,000 to $90,000 face $1080 tax rise under May 11 budget

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Australians on middle incomes could end up paying an extra $1,080 a year in tax from July unless the relief program is extended.

Treasurer Josh Frydenberg’s upcoming budget on Tuesday will determine whether 10million Australians get more in their pocket when they put in their tax return.

Without an extension of last year’s program, 4.6million Australians earning between $48,000 and $90,000 would miss out on $1,080 as another 1.8million people earning $37,000 to $48,000 were deprived of their $255 offset.

The government has quietly indicated the low and middle-income tax offset could be extended but no announcement has been made ahead of the budget, causing anxiety among tax experts.

Tax agent H&R Block’s director of tax communications Mark Chapman said the budget for 2021-22 would leave most Australians worse off unless the tax offset was extended.

Australians on middle incomes could end up paying an extra $1,080 a year in tax from July. Pictured are commuters in Perth at a train station

Australians on middle incomes could end up paying an extra $1,080 a year in tax from July. Pictured are commuters in Perth at a train station

‘In fact, if things stay as they are, low and middle income earners face a tax rise because of the abolition of the low and middle-income tax offset,’ he told Daily Mail Australia.

‘It was clear that this would happen at the time of the last federal budget so I assume either that the government simply didn’t notice, in which case the tax hike might be reversed this time, or didn’t care, assuming it could spin its way out of trouble by focusing on the forthcoming tax cuts for high income earners.’

Last year, the budget provided low and middle-income tax offsets for those earning up to $126,000.

That tax relief was introduced in the October 2020 budget as Australia recovered from the aftermath of the Covid recession and was regarded as a one-off.

Last year, stage two tax cuts that in the 2019 budget were earmarked for July 2022 were fast tracked to 2020.

High-income earners are getting big tax cuts from July 1, 2024 as the 37 per cent tax bracket is abolished and a new 30 per cent tax bracket is created for individuals earning between $45,000 and $200,000.

Treasurer Josh Frydenberg's upcoming budget on Tuesday is expected to bereft of goodies with the one-off low and middle-income tax offset set to be discontinued - affecting 10million workers

Treasurer Josh Frydenberg’s upcoming budget on Tuesday is expected to bereft of goodies with the one-off low and middle-income tax offset set to be discontinued – affecting 10million workers

The number of tax brackets is also being trimmed from five to four for the first time since 1984 as part of the stage three tax cuts announced in 2019.

While Labor voted for these stage three tax cuts in 2019, the opposition is revisiting its support for giving generous tax relief to high-income earners.

Shadow treasurer Jim Chalmers declined to explicitly advocate keeping the low and middle-income tax offsets in Tuesday night’s budget, noting that gross government debt was likely to surpass the $1trillion mark by June next year.

‘We supported tax relief for low and middle-income earners but it made no sense to commit to big tax cuts for the highest earners three to four years down the track, when we don’t know what the budget will look like, or whether it’s responsible,’ he told Daily Mail Australia.

This would see 4.6million Australians earning between $48,000 and $90,000 miss out on $1,080 as another 1.8million people earning $37,000 to $48,000 were deprived of their $255 offset. Tax agent H&R Block's director of tax communications Mark Chapman said the budget for 2021-22 would leave most Australians worse off unless the tax offset was extended

This would see 4.6million Australians earning between $48,000 and $90,000 miss out on $1,080 as another 1.8million people earning $37,000 to $48,000 were deprived of their $255 offset. Tax agent H&R Block’s director of tax communications Mark Chapman said the budget for 2021-22 would leave most Australians worse off unless the tax offset was extended

‘We’ll make our views on income taxes known well before the election.

‘This government’s eighth budget can’t be yet another missed opportunity to invest in people, their jobs and the future, so that we actually have something to show for the Morrison government’s trillion dollars in debt.’

Mr Chapman saw no need to bring forward the tax cuts planned for 2024 but he argued it made sense to continue the low and middle-income tax offset for the next three years.

Shadow treasurer Jim Chalmers declined to explicitly advocate keeping the low and middle-income tax offsets in Tuesday night's budget, noting that gross government debt was likely to surpass the $1trillion mark by June next year. He is pictured with his wife Laura, a journalist and former Labor press secretary and their children Jack and Annabel

Shadow treasurer Jim Chalmers declined to explicitly advocate keeping the low and middle-income tax offsets in Tuesday night’s budget, noting that gross government debt was likely to surpass the $1trillion mark by June next year. He is pictured with his wife Laura, a journalist and former Labor press secretary and their children Jack and Annabel

‘The Covid-19 pandemic had the most dramatic impacts on those with lower incomes, who won’t really benefit from these tax cuts,’ he said.

‘If the government really wants to boost the economy it could do so by a combination of targeted tax cuts for those earning less than $90,000 and an increase in the JobSeeker payment, both of which would be spent rather than saved.’

JobSeeker unemployment benefits were permanently increased to $620.80 a fortnight for singles. 

The BankWest Curtin Economics Centre has called for the low and middle-income tax offset to extended from 2021-22 through to 2023-24 at an annual cost of $7.2billion.

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