Fuel excise to be halved but 'no guarantee this will be passed on to motorists'

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With everything from the price of petrol and groceries to rent and childcare seemingly on the rise, the federal government has sought to target cost of living concerns in its 2022-23 Budget with a number of temporary spending measures.

For starters, roughly six million eligible pensioners, veterans, carers, welfare recipients and concession card holders will receive a one-off payment of $250 in their bank accounts which will be automatically rolled out in April.

According to Treasurer Josh Frydenberg, the tax-exempt payment along with existing income support, "will see a single pensioner receive more than $500 in additional support over the next six months".

fuel excise cost of living petrol prices federal budget

The government has also followed through on a promise to address the financial pain many motorists are currently feeling at the bowser by cutting the fuel excise in half.

From midnight tonight the excise on both petrol and diesel prices will drop to 22.1 cents per litre for the next six months before reverting back to 44.2 cents per litre later in the year, by which time the government expects petrol prices to have softened.

The cut is anticipated to flow through to petrol prices around the country in the coming weeks, so drivers will have to wait to find out what the exact price impact at the pump will be.

And the ACCC has also confirmed that it's petrol monitoring task force will be contacting petrol retailers to set expectations about the passing on of savings to consumers.

But there is no guarantee the price cuts will be passed onto motorists, the Australian Automobile Association (AAA) says.

"The decision to booby-trap the Commonwealth Budget with a 22.1 cents per litre fuel excise cut for the next six months will fix neither Australia's transport tax problems, nor the factors driving up petrol prices," the AAA said in a statement.

"The AAA notes the change may possibly offer some short-term relief for motorists in a volatile global fuel market, but believes it generates more medium-term challenges than it solves.

"The immediate problem is that there is no guarantee that this tax cut will be passed on to motorists, as the international experience shows similar measures have delivered fuel retailer profits, rather than price drops for consumers."

The other major announcement related to household budget pressures is the introduction of a one-off $420 cost of living tax offset from July this year.

More than 10 million taxpayers are in line to receive the offset which will add on to the existing low and middle income tax offset (LMITO). That means that those earning between $37,001 and $125,999 could receive a reduction up to a maximum $1500 when they lodge their tax return this year.

The Budget makes no mention of an extension to the low and middle income tax offset - which is also known as the 'lamington' tax offset -beyond the current financial year though, meaning that millions of workers could be in for a tax hike from July 2023.

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Tom Watson is a senior journalist at Money magazine, and one of the hosts of the Friends With Money podcast. He's previously worked as a journalist covering everything from property and consumer banking to financial technology. Tom has a Bachelor of Communication (Journalism) from the University of Technology, Sydney.

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