Income tax cuts: Why Aussies $7bn better off

Hardworking Aussies have got more money in their pockets over the past six months. This is why.

A whopping $7bn worth of income tax cuts have flowed to millions of Aussie workers since July.

New Australian Taxation Office data reveals $1.1bn of the cash injection came from the government bringing forward stage two of its tax cuts.

A further $5.9bn in one-off payments of up to $1080 was made to 7.8 million low and middle income earners.

The boost for households as the country reopened from coronavirus lockdowns drove spending across the economy, including at hotels, cafes and restaurants in the September quarter.

“Hardworking Australians from all walks of life, through no fault of their own, paid a heavy price as a result of COVID-19,” Treasurer Josh Frydenberg said.

“The Morrison government has delivered $7bn in tax cuts to Australians in the second half of 2020, meaning they have more money in their pockets over this well-earned summer break.

“More than a billion dollars a month will be flowing over the next nine months.”

Treasurer Josh Frydenberg said the government had a whole suite of measures to help the economy face its biggest economic challenge since the Great Depression. Picture: NCA NewsWire / Gary Ramage

At least 2.4 million workers in NSW and almost two million in Victoria benefited from the low and middle income tax offset, according to the unpublished ATO data from July 1 to January 3.

This was on top of changes to the income tax brackets that raised the 19 per cent threshold from $37,000 to $45,000.

The top threshold of the 32.5 per cent tax bracket also increased from $90,000 to $120,000.

Mr Frydenberg said the personal income tax cuts, coupled with the government’s loss carry-back and immediate expensing incentives for business, will create around 100,000 jobs by the end of 2021-22.

Asked on the Today show if the government would bring forward the third stage of the tax cuts, Mr Frydenberg said it was sticking to the date already legislated.

Labor treasury spokesman Jim Chalmers said the opposition was pleased with the figures after calling for tax relief during the COVID-19 pandemic.

But he warned against tax concessions in lieu of JobKeeper payments, which Mr Frydenberg reiterated would cease in March.

“I don’t think the Government should put all their eggs in one basket,” he told ABC Radio on Monday.

“There are some risks that with all this uncertainty around the virus that the Government is too quick to want to withdraw some of the support.

“Too many people have been left out. There are almost a million workers over 35 for example, more or less stranded when JobKeeper runs out in a couple of months time.”