More than 10 million Aussies, who earn less than $126,000, are facing a tax hike from next financial year.
About 3.4 million people will be $1080 a year worse off and 7 million will take home less pay, according to analysis by the Bankwest Curtin Economics Research Centre, which was done for The Sydney Morning Herald and The Age.
Without tax cuts for low and middle income earners, there’s a risk Australia’s economic recovery from the pandemic could slow, found the analysis.
The tax offset, which pays people who earn between $48,000 and $90,000 a maximum of $1080 once they complete their tax returns was announced in the 2020-21 budget.
For someone earning $80,000 their net income is currently $63,013. But next year this will drop to $61,933 without the tax cut. For people on $40,000, their salary will be cut from $36,113 to $35,663.
For a person on $60,000, they will have taken home $50,013 but this will fall to $48,933 next year and still won’t grow over $50,000 by 2024-25.
While further tax cuts have been flagged for 2024-25, a person on $80,000 will only increase their tax home pay to $62,808. A person on $40,000 won’t receive any extra money by 2024-25, sitting at $35,633 over the next three years
Yet a person earning $250,000 will see their salary increase to $170,908 from $161,833 in 2020-21.
A person on $250,000 will be paying $9075 less in tax by 2024-25 compared to just $45 less for someone on $90,000.
But those on lower salaries, will be paying more tax by 2024-25 compared to this financial year.
So if you’re on $40,000, you will be paying $480, $50,000 sees an extra $955 to the tax man, $60,000 means you stump up $705, while $70,000 takes a hit of $455.
The end of the tax cut is expected to disproportionately impact on women. The average woman is expected to pay $1506 in tax over the next three years, compared to $1156 for men, Rebecca Cassells and Alan Duncan from the Bankwest Curtin Economics Research Centre told The Sydney Morning Herald.
“The withdrawal of the low and middle income tax offset from 2021-22 will disproportionately affect women, who will face an average increase in taxes paid of $502 per year from 2021-22 to 2023-24, relative to 2020-21,” they said.
“For men, the average annual increase in taxes paid will be lower, at around $385 per year.”
The researchers suggested the tax offset could be extended for three years at a cost of $21 billion.
Australian Taxation Office data reveals $1.1 billion of the cash injection came from the government bringing forward stage two of its tax cuts.
A further $5.9 billion in one-off payments of up to $1080 was made to 7.8 million low and middle income earners.
Yet, Australians could also be hit with a $610 tax hike under a Medicare-style levy proposed to fix the aged care system, after the royal commission released its final report in March.
One recommendation was a Medicare-style levy with funds required to be diverted to the aged care sector, while another urged the government to introduce a general, 1 per cent “aged care improvement levy”, sourced from personal taxable income.
Prime Minister Scott Morrison has not ruled out the Medicare-style levy in response to the royal commission into aged care’s damning findings.