An estimated 3.4 million Australians with a taxable income between $48,000 and $90,000 will be affected as the low and middle-income tax offset (LMITO), worth $1080, finishes at the end of this financial year, says the Bankwest Curtin Economics Centre.
Originally part of stage 1 of the Coalition government’s Personal Income Tax Plan, the LMITO was introduced in the 2018-19 Federal Budget to reduce tax burdens for Australians with low and middle taxable income.
At the time of its introduction, the government estimated that the scheme would help around 4.5 million Australian taxpayers who are eligible for the full LMITO of $1,080 and 5.6 million eligible for a partial LMITO.
The program was scheduled to run until the end of the 2019/20 financial year but was extended as a COVID-19 stimulus measure in the last budget.
Analysts at Bankwest Curtain believe that the removal of the LMITO will effectively cancel out the benefits of these changes to tax thresholds for $48,000-$90,000 earners, making them no better off than they were in 2019/20 unless Treasurer Josh Frydenberg decides to keep the LITMO in the 2021/22 budget.
However, a spokesperson for Treasurer Josh Frydenberg refused to comment on the program.
“The government doesn’t comment on budget speculation,” a spokesperson for the treasurer told AAP.
The budget in May will be the eighth budget since the Coalition government came to power in 2013 and is forecast to be filled with contradictions as the Treasurer faces continuing the economic recovery from last year’s recession, the increasing levels of government debt which has raised to $1 trillion, and an election coming in the next 6 to 12 months.
A survey by the Australian Financial Review showed that 61 percent of the 530 people surveyed said that Treasurer Frydenberg should focus on stimulating the economy. In comparison, 31 percent believed that he should repair the budget.
“Confidence is the cheapest form of stimulus,” Frydenberg said in an interview with Daily Telegraph. “I’m very focused on getting the private sector to drive the economy, and that means encouraging and enabling businesses to invest and grow.”
“I’m very proud of what more than 25 million Australians have achieved over the past year,” he said. “We’re not out of it yet, but we can see the light at the end of the tunnel.”
AAP contributed to this report.