Eight million Aussie workers to be slugged with $1500 ‘tax increase by stealth’ come July

At least eight million Aussie workers are facing a $1500 ‘tax increase by stealth’ come July prompting calls for more support in the May federal budget.

Millions of Aussie workers are facing a $1500 “tax increase by stealth” come July prompting calls for more support in the May federal budget.

People earning between $37,000 and $126,000 have been eligible for the low and middle income offset of up to $1080 when they filed their tax returns over the past four years.

But after a one-year extension and an extra $420 cost-of-living offset, both major parties supported ending the $7bn break this financial year.

At least eight million workers face being slugged $1500 more in tax this year.

However, those earning below $66,667 will continue to get a low income tax offset worth up to $700.

Matt Grudnoff has called the hike a ‘tax increase by stealth’. Picture: Richard Jupe

Senior economist Matt Grudnoff said the decision would come as a “rude shock” as living costs continue to bite.

“This was kind of a tax increase by stealth,” Mr Grudnoff said.

“When people do their tax return they might be thinking they are going to get a chunk of stuff that they can spend on things but it just won’t be there.

“Particularly with costs rising it would have been quite valuable to … pay things like rapidly rising electricity bills, gas bills, even just groceries that are going up in price.”

Mr Grudnoff, from think-tank The Australia Institute, acknowledged that continuing the payment would have had an inflationary impact, countering what the Reserve Bank was trying to do by increasing interest rates.

Childcare subsidy increases from July are expected to offset some families’ losses.

People who receive income support, pensioners, health card holders, Family Tax Benefit A and B recipients and small business customers are also due to receive power bill relief in the budget.

Grattan Institute CEO Danielle Wood says the government should also look to increasing rent assistance. Picture: Supplied

But Grattan Institute CEO Danielle Wood said the government should also increase rent assistance because it was targeted support that would have the least impact on inflationary pressures.

Ms Wood said not extending the tax cut was the “right decision” because the budget had major structural problems, and there was a risk the economy would be pushed so hard it would enter a recession.

“Vacancies are down and market rents are up right across the country so (rent assistance is) something that eases, just a little bit, some of those housing pressures,” she said.

Finance Minister Katy Gallagher last week said the budget was an opportunity to look at support for the “most vulnerable” Australians.

“Those decisions are currently being worked through the Expenditure Review Committee for the budget that we’ll hand down on 9 May,” Senator Gallagher said.