Anthony Albanese has left the door open to a cash boost for Australian workers in the upcoming federal budget as speculation ramps up around Treasury’s final deliberations.
Treasurer Jim Chalmers is reportedly set to unveil a one-off stimulus – dubbed an “earned income offset” – between $200 to $300 for every Australian who gets a wage or salary and pays tax, The Australian reports, as part of the government’s tax package on May 12.
The Prime Minister remained tight-lipped when asked about the measure by reporters on Tuesday, but did not rule it out.
“It’s a whole lot of speculation out there in budgets, and that’s what happens. Some of it’s right, some of it’s wrong,” Mr Albanese told reporters in Queensland.
Australians would have to wait for the budget to be delivered, he said, when pressed for further details.
“People will make their own mind up about the decisions that we have made, but we have made decisions across the board on savings. You’ll see expenditures,” he said.
“You’ll see us work through a budget that is consistent with Labor principles and consistent with strengthening the economy but also looking after people on the way through.”
The International Monetary Fund warned last month that government spending would make it harder for central banks to combat inflation.
“While such measures are popular, evidence suggests they are often both poorly designed and very costly for the public purse,” IMF chief economist Pierre-Olivier Gourinchas said at the time.
“Avoiding fiscal stimulus is also critical when inflation is rising, so as not to complicate central banks’ task.”
Reports of the offset come as Mr Chalmers is set to axe the 50 per cent capital gains tax (CGT) discount in the May 12 budget, effectively raising taxes on investments like property and shares, and wind back negative gearing, as part of efforts to promote intergenerational fairness in the housing and tax systems.
A Greens-led senate inquiry found in March that the CGT discount skewed home ownership towards investors, disproportionately benefited wealthier Australians and distorted productive investment.
Although Nationals leader Matt Canavan would not be drawn on specific reports of the earned income offset, he cautioned the government’s use of handouts, telling Sky News on Tuesday there were “risks” with the strategy.
“There are risks with handouts itself, that it doesn’t create those pro growth incentives,” Senator Canavan said.
“It doesn’t create more opportunities in the Australian economy, but it does, of course, put extra heat in the economy too, potentially worsening inflationary pressures.”
But Coalition foreign affairs spokesman Ted O’Brien later went as far as to claim that Australians were “being mugged by a government that cannot control its spending”.
“The idea (Australians are) going to get now a $200 tax offset … the Albanese government is basically putting their hand in the back pocket of every Australian worker, flogging their wallet, taking out big wads of cash, and then putting some loose change in their front pocket, wanting to be patted on the back,” he told Sky News.
But he did not rule out Coalition support for the change, saying: “Let’s wait to see what they put on the table, and let’s look at it in a holistic sense to see what else they’re trying to do with the budget.”
EV exemption ‘sensible’: Bowen
This week, the government also announced it would wind back the popular Fringe Benefits Tax (FBT) exemption for electric vehicles, a move Energy Minister Chris Bowen described as “sensible”.
The government claims it will save the budget $1.7bn over the next five years.
“It is a substantial saving, but it’s a better calibrated support for EV purchases … the country benefits when we have a higher EV take-up,” Mr Bowen told ABC Radio National on Tuesday.
The FBT is a tax paid by employers for non-salary benefits provided to employees like parking, company cars and gym memberships.
The EV exemption introduced in 2023 means an electric vehicle worth less than $91,387 purchased through a novated lease is exempt from the FBT tax.
But under the changes, this discount will only be extended until the end of March 2027.
After this, it will then apply to EVs costing under $75,000 until April 2029.
EVs that cost more than $75,000 but are still below the luxury car tax threshold will be eligible for a 25 per cent discount on the payable FBT.
From April 2029 onwards, all EVs below the luxury car tax threshold will be subject to the 25 per cent discount on payable FBT.
