Much noise has been made about coronavirus supplements and welfare assistance throughout the pandemic, but not much has been made of the $7 billion in tax cuts and low income concessions put into the pockets of nearly 8 million Australians over the past six months.
Australian Tax Office (ATO) data shows about $1.1 billion has gone to taxpayers under the federal government’s stage two tax cuts, which occurred between 1 July 2020 and 3 January 2021.
Another $5.9 billion has also been doled out under the low and middle income tax offset that went to around 7.8 million people during the same period.
The tax cuts may be partly responsible for our nation’s faster-than-expected economic recovery, led by the boom in retail spending in the second half of 2020.
The Australian Retailers Association (ARA) says retail had “quite a successful period” over Christmas-New Year, despite lockdowns.
“For Sydney obviously with the COVID outbreak on the northern beaches, foot traffic was down in the city. We did, however, see it really pick up in suburban areas such as Parramatta, as people seemed to be keener on shopping in their local area,” said an ARA spokesperson.
“We saw more people shopping online, as was expected, and so there was a massive spike there.
“November was a really great month because we had Black Friday and Cyber Monday … a record-breaking month in terms of online sales and that has sort of provided some good momentum heading into the pre- and post-Christmas sales.”
Household consumption in the September quarter was the largest on record at 7.9 per cent. Overall, the economy grew by 3.3 per cent after a 7 per cent dip in the June quarter.
And while Australia’s economy seems to be healing much faster than most expected, economists warn that restrictions and border closures across the country will still play a massive role in how quickly it can recover.
Current border restrictions which have forced travel sector closures in Queensland and New South Wales could cost the economy more than $3 billion in lost trade over the January holiday period alone.
All eyes are now on community transmission numbers across the eastern states, and on whether the UK strain can be contained.
In the meantime, federal treasurer Josh Frydenberg is happy the tax cuts seem to be having the desired effect on Aussie households.
“As part of our economic recovery plan, the Morrison government has delivered $7 billion 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,” said Mr Frydenberg.
The treasurer said the income tax cuts coupled with business incentives would create 100,000 jobs by the end of 2021-22.
How these tax cuts affect retirees remains to be seen.
“The overwhelming majority of retirees pay no tax and therefore will receive no benefit from such an income tax cut,” The Australia Institute senior economist Matt Grudnoff told YourLifeChoices when the tax cuts were first considered.
“They may, however, be very concerned that a tax cut reduces the amount of money that governments can spend on health services and the Age Pension – things that retirees depend on.”
Since these tax cuts have taken effect, the government has announced aged care funding of around $1 billion, to help older Australians live at home for longer with support.
Much of this money will go towards creating an extra 10,000 home care packages, meaning around 195,600 older Aussies can age in place by the end of June next year.
“By providing more support to people at home, we are ensuring that Australians, as they age, have greater choices and their families have greater choices,” said Prime Minister Scott Morrison.
“We will continue to address the many challenges there are in aged care, not only by boosting funding but also providing better access to health services to improve physical and mental wellbeing for older Australians.”
Overall, the tax cuts should see more than 11.5 million people better off, with low and middle income earners getting an ‘income boost’ of up to $2745 for singles and $5490 for dual-income families compared with 2017-18 tax bills.
Treasury estimates the tax cuts will boost GDP by about $3.5 billion in 2020-21 and $9 billion in 2021-22 and will create an extra 50,000 jobs by the end of 2021-22, says a report from The Australian.
Have you benefited from the government’s tax cuts?
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