Mid to high income earners get most benefit from Budget

federal budget

13 May 2021
| By Mike |
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Mid to high income earners have emerged as winners from this year’s Federal Budget, according to new analysis from the National Centre for Social and Economic Modelling (NATSEM) at the University of Canberra. 

NATSEM’s Budget analysis found that the extension of the low and middle income tax offset (LMITO) actually benefits higher income families as low-income families often do not earn enough to fully benefit from the tax offset.  

The report also suggests that the childcare subsidy increase will also benefit mid and high income families given increased childcare use as well as the activity test requirement of the childcare subsidy. 

“To claim the full benefit from the increased childcare subsidy, families will need to have an income of at least $129,000 a year, as the lower-income families already claim benefit closer to the capped ratio,” said Professor Jinjing Li, who runs NATSEM’s tax modelling. 

If the childcare price rises due to the increased demand, families with a single child or lower income may even lose out. The removal of the cap of childcare subsidy also favours high-income families. 

Assuming families use childcare on days when parents are at work, the Budget's impact is likely the largest for the families in the fourth quintile and the lowest for the families in the bottom quintile. 

“Overall, the impact of the proposed tax transfer policy change in this year's budget is small compared with the likely impact of the 2024/25 tax cut, which will substantially benefit the higher income groups,” said Professor Li. 

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