Low and Middle-Income Tax Offset could be Extended
Prime Minister Scott Morrison has hinted that the popular tax-saving measure may return in 2022.
The federal government has teased the possibility of extending its popular tax offset ahead of the next election.
In a recent interview with The Herald Sun, Prime Minister Scott Morrison played coy when asked whether the current federal government would consider extending the low and middle-income tax offset (LMITO).
Introduced as part of the federal government’s tax cut agenda in 2018, the measure gives eligible Australians a tax benefit of up to $1,080 when they lodge their return on time. It was originally due to expire in 2020 but was extended in the wake of the COVID-19 pandemic.
The low and middle-income tax offset is currently slated to expire on 20 June 2022.
While the Prime Minister refused to commit to extending the tax-saving measure, he didn’t rule it out either.
Mr Morrison insisted that a decision about the offset would be made at “an appropriate time” but emphasised the current government’s track record for delivering tax cuts.“If you really want people and business to get on and do things, you can’t keep more of what they earn; it has to go back the other way,” he said.
Speaking to Accountants Daily, CPA Australia senior manager for tax policy Elinor Kasapidis said while it’s only speculation at present, the professional accounting body would back the extension should it occur.
“We would support extending the LMITO for the 2022-23 income year to help lower income earners who are still struggling financially because of the pandemic,” Ms Kasapidis said.
“The last time the LMITO was extended, it formed part of the 2020-21 budget announcement. This time around it may become an election issue, making it likely that an announcement would precede the budget.
“It’s inaccurate to compare removing the LMITO with a tax rise, as it has already been incorporated into the Phase 2 tax cuts.
“The LMITO was designed as a temporary fix to deal with bracket creep, with Phase 2 tax cuts being the permanent solution. Phase 2 tax cuts were brought forward from 2022-23 to the 2020-21 income year. Meanwhile, the LMITO, which was due to expire in mid-2020, was extended because of the pandemic. Now that we have both, there’s an element of double dipping from a taxation point of view.
“However, that doesn’t mean we should go all Scrooge McDuck and get rid of the LMITO immediately. Tax relief boosts the economy and consumer confidence. At this stage of Australia’s economic recovery there’s a case to be made for continuing measures like this a bit longer.
“On the other hand, the longer this off-set is extended, the more this or successive governments will potentially paint themselves into a corner. It only takes a couple of years before measures which were once temporary become an expectation in the eyes of the public. They can become very difficult politically to unwind once that occurs.”
Going forward, Ms Kasapidis noted that if the LMITO is extended for another year, low and middle-income earners will continue to receive an additional tax reduction in their 2022-23 income tax returns worth up to $1,080.
“As many small businesses are unincorporated, they would also receive a direct benefit if the LMITO was extended,” she clarified.
“The ATO applies this offset directly to the returns of eligible taxpayers, meaning there’s no need for action from accountants on behalf of their clients.”
Welcome to Accountplan, proudly assisting the community in Redcliffe and surrounds for almost 40yrs with:
– an experienced team of Accountants providing Tax & Business Advisory services
– Bookkeepers to help you with BAS, IAS & Payroll
– Financial Planning advice around Wealth Creation, Super & Aged Care Strategies
– Mortgage Broking services for Home Loans, Investment Loans, Business and even Vehicle Finance
While you’re here why not check out our site and see what we might be able to help you with…………
- Less than $37,000 per year = $255
- Between $37,000 and $48,000 = $255 + 7.5% of the amount over $37,000
- Earn between $48,000 and $90,000 = $1080
- Between $90,000 and $126,000 = $1080 less 3% of the amount over $90,000