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Millions of Aussies set for $1080 tax break when Josh Frydenberg hands down budget

Colin Brinsden, AAP Economics and Business CorrespondentAAP
VideoCOVID tax cuts on the way for 10 million Aussies

Millions of Australians may not lose a one-off COVID tax benefit after all when Treasurer Josh Frydenberg hands down his budget on May 11.

The low and middle-income tax offset (LMITO), which is worth up to $1080 and benefits people with a taxable income between $48,000 and $90,000, is supposed to end in June.

But reports suggest this bonus will be extended for another year at a cost of about $7 billion.

The treasurer is giving nothing away at this stage.

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“The government doesn’t comment on budget speculation,” a spokesman for the treasurer told AAP.

The tax offset was set up as a one-off economic stimulus measure during the coronavirus pandemic.

Analysts at the Bankwest Curtin Economics Centre have estimated about 3.4 million taxpayers - 50 per cent of whom were women - would lose out if it was dropped.

The tax offset is claimable when people submit their tax returns.

Additional funding for aged care is expected to be a key component of the budget, with media reports suggesting it could be a $10 billion package.

In the past couple of days the government has set aside more than one billion dollars in climate change initiatives - $565 million for international collaboration on low emissions technology, a $263 million investment for carbon capture and storage and another $275.5 million to set up regional hydrogen hubs.

The Department of Treasury in Canberra.
Camera IconThe federal government could extend the $1080 low and middle income tax offset in the May budget. Credit: AAP

Mr Frydenberg will have the opportunity to give an update of the government’s fiscal strategy when he addresses an audience in Perth.

Last week, after another exceptionally strong labour force report which saw the unemployment rate drop to 5.6 per cent, the treasurer indicated he would provide an such an update prior to budget night.

Before the last year’s October budget - which was delayed because of the pandemic and contained hundreds of billions of dollars of stimulus measures to counter it - Mr Frydenberg said budget repair would only start after the jobless rate was comfortably below six per cent.

“We’re not comfortably below six per cent today and we’re not out of the pandemic,” the treasurer told reporters.

Economists like Chris Richardson believe the government should be more ambitious in its unemployment target.

“The Reserve Bank aims for an unemployment rate of 4.5 per cent,” Mr Richardson, a partner at Deloitte Access Economics, said.

“The government should shift its line in the sand ... aiming for an unemployment rate comfortably under five.”

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