Treasurer defends phase out of low income tax relief

The treasurer has defended his decision to push ahead with his predecessor’s plan to axe a tax offset that saved low and middle income earners up to $1500 a year.

Jim Chalmers has confirmed the tax offset for low and middle income earners will end in line with the former government’s decision to wind down the relief measure.

Dr Chalmers said the low and middle income tax offset (LMITO), designed to give low and middle income earners immediate tax relief, was due to end as specified by the former treasurer in the lead-up to the Morrison government’s last budget in May 2022.

“At the time, my predecessor Josh Frydenberg said this is not a permanent feature of the tax system,” Dr Chalmers told reporters in Brisbane.

The opposition has accused the government of confirming the changes under the cover of the Easter break.

Opposition Leader Peter Dutton said many Australians would be worse off if the offset was scrapped.

“They said before the election of course, that they would have a $275 reduction in their electricity prices each year and now we find the government only has a plan to slug 10 million Australians to the tune of $1500 a year,” Mr Dutton told reporters.

Dr Chalmers said Labor made it clear that it could not afford to extend the low and middle income tax offset if it won the federal election.

“We made it clear at the time that the LMITO was ending last year, and so it has been completely and predictably dishonest from Angus Taylor, Michael Sukkar and all of these other B-graders to now pretend that this is some kind of new announcement made by the government,” he said.

H&R Block tax expert Mark Chapman said the LMITO was introduced in 2018 under the Turnbull government as part of three-stage reforms to the tax system.

Mr Chapman told AAP the offset was supposed to expire a few years ago but was extended and boosted throughout the COVID-19 pandemic to help people doing it tough.

The stage two reforms, which were meant to kick in once the LMITO was removed, were also brought in early and lifted tax bracket thresholds for middle-income earners and permanently boosted the existing low income tax offset.

The controversial stage three tax reforms, which will flatten Australia’s tax brackets, are due to start in 2024.

Despite the disappearance of the tax relief measure, Dr Chalmers said there would still be cost of living assistance in the May budget. This includes $1.5 billion in electricity bill assistance.

He said the budget would also focus on building resilience against international shocks as the global economy.

The treasurer is due to head to Washington for key talks with world counterparts, with global financial uncertainty set to dominate discussions.

Dr Chalmers will take part in the G20 finance ministers’ talks in the US, as well as IMF and World Bank meetings and central bank governors’ meetings during the three-day trip.

He will hand down his second budget on May 9.

Poppy Johnston
(Australian Associated Press)