Tax experts and economists call for one-time cash payment instead of fuel tax freeze

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A full tank of gas has suddenly become a luxury that will weigh heavily on a household’s budget.

With the average price of petrol having risen by nearly 50 cents a liter over the past five weeks, many Australians are looking to the government for help.

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One of the measures being considered is the freeze on fuel excise, a tax of 44 cents per liter levied by the government.

While on paper this seems like a quick fix, tax experts suggest a cash payment would go further.

This week, senior tax lawyer Susan Franks of Accountants Australia and New Zealand said it was not just petrol that was tipping the balance of household budgets, but also the rising cost of household goods. ‘grocery store.

“These items are generally not discretionary and the Australians who suffer the most are those on low incomes,” she said.

“Reducing excise duties on fuel will not necessarily lead to lower prices at the pump and reduce incentives to go to net zero.

“Australia is a price taker on fuel and there is no guarantee that any cost reductions will be passed on to consumers.”

Ms Franks said “direct relief payments” would be a much more effective way to address the problem, comparing it to the one-time $750 payment given to welfare recipients during the pandemic.

“Direct relief payments would be much more effective in helping Australians with hip pouch pain today and allow them to spend money on the items they need – not just petrol. .”

Economists suggest that a single cash payment is more feasible than a fuel excise duty cut. Credit: Getty Images/iStockphoto

7NEWS.com.au has previously reported that the Federal Government is considering a cash payment in this year’s budget to tackle rising cost-of-living expenditure.

If included in Treasurer Josh Frydenberg’s budget on Tuesday, it would likely be a one-time payment of between $200 and $400 for working Australians, paid directly into bank accounts ahead of the federal election.

The date of the elections has not yet been set, but it should take place in May.

“A one-time payment is a temporary solution to what may be a temporary problem,” Ms Franks said.

“This gives the government more time to determine the future global and Australian economic outlook without permanently altering mechanisms that would reduce revenue and make our transition to net zero emissions more difficult.”

Fuel prices continue to climb above $2 per litre.
Fuel prices continue to climb above $2 per litre. Credit: DIEGO FEDELE/AAP

UNSW economics professor Richard Holden said he expected a one-off payment to be made instead of a cut in fuel excise duty, and that any payment would be means-tested.

“There will be cost-of-living-type measures that won’t get rid of the fuel excise, or take it away for a while,” he said.

“I guess it will probably be something like some sort of means-tested direct payment.

“So every Australian earning below a certain level of income will get some sort of mostly direct payment, you know, a couple hundred dollars, six hundred dollars something like that.”

The Treasurer and Prime Minister have both promised a support package for households in the face of rising cost-of-living expenditure – but declined to specify exactly what that will look like.

“We are very aware of these pressures on the cost of living that have been caused by these horrific events that we have seen with Russia’s illegal invasion of Ukraine,” said Scott Morrison.

“The budget is presented next week and we have carefully considered our response to ensure that we can provide a budget that both meets these immediate needs, but also ensures that we continue our strong economic plan.”

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