17th May 2021 | Tax
The Low and Middle Income Tax Offset was first introduced by the government in 2018 as part of the bigger seven-year, Personal Income Tax Plan. The offset was stage one of the plan and was originally intended to end last year. However, the government decided to keep it going during the pandemic and now it is expected to be extended for another year.
It was brought in as an addition to the already-in-place low-income tax offset (LITO), which is designed to help out earners with an annual salary below $37,000. The low and middle-income tax offset extends this to earners with a taxable annual salary between $37,000 and $126,000.
In the 2020 federal budget, the maximum low-income tax offset was increased to $700. The low and middle-income tax offset amount is currently between $255 and $1,080 for individual taxpayers. If the tax offset is extended, it will come in the form of a tax rebate for those eligible.
Research published by Rebecca Cassells and Alan Duncan from the Bankwest Curtin Economics Centre suggests that withdrawing the tax offset for low and middle-income earners would have a disproportionate effect on women.
According to the authors, if the LMITO came to an end in 2021 women could face an average yearly tax hike of around $502. Men would face a lower yearly tax increase of around $385.
The authors say that once stage three of the Personal Income Tax Plan is introduced (as above), net taxes could be reduced by an average of $637 per year for women and $2,989 per year for men. However, stage three is not set to start until the 2024/2025 tax year. This stage of the government’s plan includes:
- Lowering the 32.5% tax rate to 30%
- Raising the upper threshold for the 30% tax bracket from $90,000 to $120,000
- Removing the 37% bracket
- Raising the 45% lower threshold from $180,000 to $200,000.
Director of Tax Communications at H&R Block, Mark Chapman says that if the government were to stick to its original plan (meaning no personal tax cuts for 2021/2022) low and middle-income earners could face a tax rise. He says, “Tax rises will be between $255 and $1,080, with the worst affected earning between $48,001 and $90,000 per annum.”
Chapman added that “the government needs to take action to prevent this highly damaging tax rise by extending the availability of the offset through until 1 July 2024.”
The Low and Middle Income Tax Offset was first introduced by the government in 2018 as part of the bigger seven-year, Personal Income Tax Plan. The offset was stage one of the plan and was originally intended to end last year. However, the government decided to keep it going during the pandemic and now it is expected to be extended for another year.
It was brought in as an addition to the already-in-place low-income tax offset (LITO), which is designed to help out earners with an annual salary below $37,000. The low and middle-income tax offset extends this to earners with a taxable annual salary between $37,000 and $126,000.
In the 2020 federal budget, the maximum low-income tax offset was increased to $700. The low and middle-income tax offset amount is currently between $255 and $1,080 for individual taxpayers. If the tax offset is extended, it will come in the form of a tax rebate for those eligible.
Research published by Rebecca Cassells and Alan Duncan from the Bankwest Curtin Economics Centre suggests that withdrawing the tax offset for low and middle-income earners would have a disproportionate effect on women.
According to the authors, if the LMITO came to an end in 2021 women could face an average yearly tax hike of around $502. Men would face a lower yearly tax increase of around $385.
The authors say that once stage three of the Personal Income Tax Plan is introduced (as above), net taxes could be reduced by an average of $637 per year for women and $2,989 per year for men. However, stage three is not set to start until the 2024/2025 tax year. This stage of the government’s plan includes:
- Lowering the 32.5% tax rate to 30%
- Raising the upper threshold for the 30% tax bracket from $90,000 to $120,000
- Removing the 37% bracket
- Raising the 45% lower threshold from $180,000 to $200,000.
Director of Tax Communications at H&R Block, Mark Chapman says that if the government were to stick to its original plan (meaning no personal tax cuts for 2021/2022) low and middle-income earners could face a tax rise. He says, “Tax rises will be between $255 and $1,080, with the worst affected earning between $48,001 and $90,000 per annum.”
Chapman added that “the government needs to take action to prevent this highly damaging tax rise by extending the availability of the offset through until 1 July 2024.”
For tax updates please go to the Government website
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