As part of the government’s pandemic response, millions of Australians benefitted from tax cuts applicable to low and middle-income earners (LMITO). These tax offsets that amounted to anywhere between $255 and $1080, depending on taxable income, have been in use for the last several years. The measure was due to expire in 2020 but was extended due to the pandemic. It was again approved in the 2021 federal budget, providing tax cuts of up to $1080 for singles and $2160 for partners. This popular relief is due to expire in June 2022. It returned an estimated $7 billion back into taxpayers’ pockets in 2021. It was touted in early July by Treasurer Josh Frydenberg as putting more money in taxpayers’ pockets to spend across the economy.
During an interview with the Saturday Herald Sun this week, PM Scott Morrison indicated that the measure may make a comeback in the coming year if his party wins the upcoming federal election. Though he declined to give concrete confirmation, he did note that delivering tax cuts was “always the approach”. He added that the government had a strong record of delivering tax cuts and that to help people and businesses get on required not keeping more of what they earned. PM Morrison said that a decision on extending the offset would be made at the appropriate time.
CPA Australia has indicated its support for such an extension of the tax offsets. Senior manager for tax policy, Elinor Kasapidis, has said that the accounting body hoped for an extension into the 2022 to 2023 income year as a means to support low-income earners that were still struggling with the effects of the pandemic. She added that though the measure was intended to be temporary in addressing the problem of bracket creep, it was still useful as a means to boost the economy and consumer confidence. She advised against ending the measure too soon.
Some have however criticized the measure and say it is wrong to term it a tax cut. Director of Tax Communications at H&R Block, Mark Chapman, has said that the offsets were, in reality, the deferral of a tax rise that the government had already legislated. He expressed displeasure at what he considered government spin and reiterated that the tax burden faced during the pandemic was not going anywhere and that taxpayers should not count on extra monies during next year’s pay packets as there weren’t any.
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