As part of the upcoming federal budget, the Australian Government has announced that it will give 10 million working Australians a one-off tax cut. The purpose of this incentive is to boost the economy as it has been revealed that the number of long-term unemployment across the country is drastically increasing despite Australia’s quick rebound from the covid-19 recession.
The Treasury announced that low- and middle-income tax offset will be extended for another year at a cost of $7.2 billion.
The LMITO, commonly referred to as the “lamington”, was introduced by the federal government in 2018-19 as part one of a three-stage tax cut plan. It was going to be axed when stage two commenced but it was kept last year as a consequence of the covid-19 recession.
The end of the LMITO in 2021 would lead to people earning less than $126,000 a year being given a face increase of up to $1080 starting next financial year.
The tax increase threatened to deliver a $5.5 billion hit to the economy in 2021-22.
The offset will occur for just one more year. Once it concludes, the tax burden on low- and middle-income earners will again increase with Australian women facing the largest hit. Between 2022-23 and 2024-25, the average tax paid by female workers will rise by $1004 when in comparison it will rise to $770 for the average male worker.
The proposal will furthermore only delay a year a lift in the effective marginal tax rate for workers who earn $40,000 a year or around the minimum wage.
The cost of the tax offset extension will need to be borrowed by the government, which already has public debt at a record $836.7 billion.
As a result of soaring iron ore prices, the budget deficit, which was originally forecast to be $197.7 billion this year, is now projected to be closer to $150 billion.
The upcoming budget’s position is much better than expected due to the fact that Australia has lower levels of unemployment than what was originally feared. The jobless rate in the mid-year update was anticipated to reach 7.25 percent but in March 2021 it had fallen to 5.6 percent.
Despite this, figures from the Australian Bureau of Statistics released on Thursday 29th April illustrate that long-term unemployment is at the highest it has been in over 26-year with more than 244,000 people out of work for at least 12 months or more.
The number of long-term unemployed Australians has risen by almost 39 percent over the past 12 months with the number of men out of work for over a year up by 44 percent.
How quickly it takes for these people to get back into the workforce is a major problem. In most cases when a person has been unemployed for a short period of time then it’s more likely that they will find work. The longer a person is out of work the harder it is for them to get back into the workforce.
The Australian Bureau of Statistics (ABS) has announced that almost 71,000 new jobs were added to the Australian workforce between February and March 2021.
The total hours worked has also returned to the same levels that were recorded prior to the covid-19 pandemic. These figures are also illustrating hat there is a big increase in full-time employment across the country.
The recorded level of employment and hours worked in March 2021 were both higher than the levels recorded in March 2020. Employment was up by 0.6 percent and hours worked was up by 1.2 percent.
The data also illustrates that last month 62.6 percent of people over the age of 15 were employed, which is higher than March 2020 which was recorded at 62.4 percent.
The percentage of women employed is also the highest it’s ever been sitting at 58.5 per cent. This is half a percentage point higher than in March 2020. The latest figures illustrated that the percentage of men employed remained slightly lower than before the pandemic 66.8 percent, compared with 67.0 per cent in March 2020.
The number exceeded expectations for a 35,000 to 45,000 increase in jobs for the month.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 07 36086800.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 1300 1 VAULT (1300 182 858)
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