Parents to be hit with surprise tax bill

Stock image.
Stock image.

HUNDREDS of thousands of Australian families could be hit with a surprise tax bill as the government begins reviewing their income.

The Department of Human Services is set to check families’ actual incomes against the estimated income they entered into the myGov website in July 2018.

Childcare providers believe that about a third of the 1.1 million families receiving the childcare subsidy will be hit with tax charges from July 29.

Early Childhood Australia chief executive Samantha Page said the new system is confusing and the costs could lead to children being pulled out of early learning.

“There is a degree of uncertainty for families that is not comfortable,” she said.

A department spokesperson said rebalancing was a normal process and a range of repayment options would be available, adding that some families could receive a tax return.

Treasurer Josh Frydenberg.

Meanwhile,┬áTreasurer Josh Frydenberg has lauded the economy’s strong foundations while conceding it faces some “significant challenges”.

His comments come after meeting with Reserve Bank governor Philip Lowe, who appears surprisingly upbeat on Australia’s economic outlook.

This is despite having lowered the cash rate twice in recent months and after the parliament passed personal income tax cuts.

Mr Frydenberg says the challenges include the impact of droughts and floods, trade tensions between the United States and China as well as softening household consumption.

Reserve Bank governor Philip Lowe.

“While the economy does face some significant challenges … the fundamentals – in Phil Lowe’s words – of the economy are strong,” he told ABC’s Insiders program on Sunday.

Mr Frydenberg also boasted about the coalition creating 1.4 million jobs since winning government six years ago, and workforce participation being at a record high.

The treasurer met with Dr Lowe on Friday, during which the central bank governor lauded Australia’s strong fundamentals.

Dr Lowe has repeatedly urged the government to do more to support the economy beyond the tax cuts, admitting that interest rate cuts on their own cannot do the required heavy lifting.

But Mr Frydenberg has not indicated further stimulatory measures, saying the government will keep an eye on how the tax cuts will flow through the economy.

He has also played down calls for additional government infrastructure spending, pointing to the coalition’s 100 billion dollar, 10-year plan.

Mr Frydenberg said this year’s financial results have improved, but that a surplus was still not projected for 2019/20.

“Don’t get your hopes up for an early surplus,” he said.

 

Financial markets are yet to be convinced about such optimism from the treasurer and Dr Lowe, and are still predicting a further interest rate cut by the end of the year, which would take the cash rate to a paltry 0.75 per cent.

Assistant Treasurer Michael Sukkar expected a large proportion of the tax cuts – which came into force from July 1 and will be available when a person lodges their tax return – to be spent in the economy.

He told reporters on Saturday that Australians were responding to the tax cuts “in spades”, with 1.3 million tax returns lodged as of Friday, some 600,000 more tax returns compared to the same time last year.

“We would not presume to tell the Australian people how they should spend their tax refunds,” Mr Sukkar said.

‘But our expectation is that a large part of the tax refund will be spent in the economy and we know that does great things for confidence.”

More news

What the new tax cuts will mean for you

Government online portal offline for hours

Residents experiencing high rental stress rates