Low and middle income earners are set to continue receiving a temporary tax cut for another 12 months, as part of a budget plan to maintain confidence in the economy.
The low and middle income tax offset was due to finish at the end of this financial year; however, the government will now reportedly use the upcoming federal budget to extend the tax cut for another year.
The offset gives low and middle income earners an end-of-financial year rebate of up to $1080 for singles and $2160 for couples.
The rebate ranges from a base rate of $255 for those earning $37,000 or less, to a full amount of $1080 for those earning up to $90,000.
Individuals who earn between $90,000 and $126,000, receive $1080 minus three cents for each dollar earned above $90,000.
The offset was extended for an additional year in last October’s federal budget, at which time the government also brought forward the second stage of the government’s tax reform plan.
The continuation of the offset for another year is expected to benefit approximately 10 million Australians, and cost $7 billion to the budget bottom line.
According to the Australian Financial Review, the government is concerned about the impact of ending offset on its female voters, with independent analysis this week also showing how women would be most affected by its withdrawal.
The government is also reportedly wanting to maintain confidence in the economy and wants to focus on job creation in the budget to continue driving down the unemployment rate.
Treasurer Josh Frydenberg did not confirm the extension of the offset when asked on Thursday, but commented: “The best way to repair the budget is to repair the economy”.
Frydenberg said he will provide more details about the government’s fiscal strategy in the lead-up to the 2021-22 federal budget, which is due to be handed down on May 11.
Prime Minister Scott Morrison said earlier this week that cutting red tape for businesses, via a $120 million deregulation package, will be a key priority.