Low income earners to receive boost in pay packets

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May 9, 2011 2:18 PM EST

More timely tax assistance will be offered to 6.5 million Australian taxpayers on lower incomes to help encourage work and provide some modest help with cost of living pressures.

As included in Tuesday's federal budget, the Gillard government will increase the proportion of the low income tax offset (LITO) that is delivered through workers' week-to-week pay packets from 50 per cent to 70 per cent. The change means instead of being compensated after they put in their tax return at the end of the year, lower income earners are taxed less during the year.

Treasurer Wayne Swan, who will hand down his fourth budget tomorrow, says “This means a bit more money in people's wage packet week-to-week to help with cost of living pressures. We know this is a modest amount, but when the family budget is tight, every little bit helps.”

“This measure will also help boost workforce participation because putting more in pay packets week-to-week makes work more attractive.”

People with annual income of $30,000 will get an extra $300 during the year in their regular pay. A person's total LITO entitlement for any one tax year will remain unchanged.

Mr Swan said finding room for this important measure in a budget that makes substantial savings to return to surplus in 2012-13 shows the strength of the government's commitment to helping Australians on low incomes.

“The government has already delivered substantial tax cuts to low income earners through the LITO, doubling it to $1,500 over the past three years. Now we are putting more of those tax cuts into people's pockets through the year.”

“This measure will deliver more timely tax assistance each year, starting with $1.37 billion in 2011-12. This will help encourage work and provide support for our patchwork economy which is still soft in some areas due to consumer caution and recent natural disasters,” he said.

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