With the upcoming elections looming, a few concessions have been put on the table, including the extension of the popular tax offset for low and middle income earners.
The low and middle income tax offset (LMITO) was previously set to expire in 2020, but due to the pandemic has already been extended.
The LMITO gives all eligible Australians a $1,080 tax benefit when they lodge their tax returns on time. This is a huge boost for those who are financially more vulnerable than others and a welcome blessing where working restrictions caused by lockdowns and financial uncertainty through inflation can cause worrying times.
It is now set to expire on 20 June 2022 and there are hopes that although the Prime Minister did not commit to an extension, he did not rule it out either.
With businesses only now starting to recover from the strain of the past few years, many believe that if you want growth to continue, tax concessions are needed. There is widespread support for the continuation of the LMITO to support those lower income earners still struggling financially because of the pandemic.
But this tax offset was initially seen as a temporary fix to a growing concern regarding bracket creep, with Phase 2 tax cuts being the permanent solution.
Phase 2 tax cuts were in fact brought forward from the 2022-2023 income year to the 2021-2022 financial year and the LMITO continued from its 2020 expiration date. We have been reaping the benefits that both provide and unfortunately, concerns of double dipping from a taxation point of view have been raised.
Tax relief boosts confidence and the entire economy, but the longer this temporary fix remains in place, the more difficult it will be to remove it in the future.
We look to the government for more clarity on this issue in the coming months, with discussions being made on it closer to the time.
Here at Glance Consultants, we certainly see both the benefits and potential complications that the LMITO offers in conjunction with the Phase 2 tax. Call our office on 03 98859793 or fill out our contact form.