More than 10 million middle-income Australians will face one of the largest tax increases in history after the May federal budget, as households deal with rapid increases in interest rates and cost-of-living surges.
It is believed that Treasurer Jim Chalmers will not extend the Low-Middle-Income Tax Offset (LMITO) when the federal budget is delivered in May. This means that Australians earning under $126,000 a year will suffer a $1,500 loss and those earning $100,000 will be $1,200 worse off. People taking home $50,000 a year will suffer a 3.4 per cent or $29 per week cut in their after-tax income while those earning $90,000 will cop a 2.1 per cent hit.
Although the Treasurer has signalled the LMITO won’t be included in the May budget, he has indicated the government will provide a cost of living relief in some other form.
The $11 billion low and middle income tax offset was introduced by the former Coalition government. It was initially designed to only be paid in the 2019-20 financial year but was extended twice due to the pandemic. The current Labor government have confirmed that they have no intention to extend it.
The end of the offset will help bring down the budget deficit, with tax refunds to fall by almost $6 billion this financial year.
There have been constant changes to tax rates, offsets and concessions over the past few years. It’s important to be aware of these upcoming changes and understand your tax return may be lower due to the removal of the LMITO.
If you would like to discuss your tax returns for this financial year and changes coming up, please contact us on 9321 2111.
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