Millions of Australians will get additional tax relief worth $420 this financial year, as the government tries to counter surging cost-of-living concerns with a pre-election federal budget sweetener.
The pre-election budget will see the government increase the Low and Middle Income Tax Offset (LMITO), which is a temporary tax cut for Australians earning less than $126,000 a year.
Those eligible for the offset currently receive between $255 and $1,080 when they file their taxes, but under the changes, they will now receive between $675 and $1,500, paid out from July 1.
It means 10 million Australians will have an extra $420 in their pockets come tax time.
The LMITO — also known as the "lamington" — was introduced four years ago and has already been extended twice during the COVID-19 pandemic.
Some economists have expressed concern that the typically $7-billion offset could act as a stimulus payment and add to growing inflation pressures — in turn, forcing the Reserve Bank to lift official interest rates earlier than it otherwise would have.
But others have argued it would be a bad look for the government to dump the offset while keeping its expensive stage-three tax cuts — due to kick in 2024-25 — which overwhelmingly benefit higher-income earners.
Tonight's federal budget is also expected to reveal a separate, one-off payment of $250 to be given to pensioners and welfare recipients to act as immediate cost-of-living relief.
While motorists will also be given extra support at the petrol pump, with speculation the fuel excise will be cut by 10 cents a litre.
Though, it is understood that the cut to the 44-cents-per-litre fuel excise would be temporary, likely lasting no more than six months.
While slashing fuel excise by 10 cents a litre would save motorists $5 on a standard refuel, it will be expensive and is estimated to cost the budget $2 billion over six months.
Talking ahead of the budget, Prime Minister Scott Morrison told parliament the government was providing people with urgent relief.
"In addition to that … in doing so responsibly and in a targeted and affordable way, we also make the investments in Australia's future prosperity, with our long-term economic plan.
"We know that our economic plan is working because Australians are in work."
The opposition is likely to support the changes, but, with a looming election, Labor leader Anthony Albanese questioned the motive behind them.
"Once again, this budget will reflect the character of this government, a government that's always long on politics but short on plans, a government that has expressed contempt for cost-of-living issues, that has spent a decade attacking Medicare, calling for lower wages, seeing an increase in job insecurity, and simply not dealing with the cost-of-living pressures that families are feeling out there," he said.
The government is hoping the federal budget acts as a springboard into the upcoming federal election campaign.
It is also expected to forecast the fastest wage growth in a decade, with the unemployment rate also tipped to fall to 3.75 per cent in the September quarter — the lowest rate since 1974.
An almost $9 billion dollar package to bolster Australia's cyber and intelligence capabilities will also be unveiled in tonight's budget, as concerns grow over threats from potential adversaries across the globe.
The full details of the budget will be released at 7:30pm AEDT.
