The LITO is an automatic tax refund – currently capped at $700 per year – which low-income earners receive when they lodge their tax returns.

Increasing the cap to $3000 would ensure the nation’s lowest-income earners stay ahead of inflation. Those earning between $32,000 and $46,000 would receive a tax cut of more than $2,000 per year.

The reforms would help those who’ve been hit hardest by inflation: workers and families whose nominal wages may have risen, but whose real wages have fallen, as a result of surging prices, particularly on essentials like food, energy and rent.

The analysis shows the cost of increasing the LITO would be $11.98 billion per year. This revenue could be replaced with a gas export tax – as suggested by the ACTU – which could raise $17 billion.

Recent polling also shows widespread support across party lines for a 25% tax on gas exports, with particularly strong support among One Nation and Greens voters.

One Nation yesterday announced a policy to charge the gas industry royalties, while Independent Senator David Pocock threw his support behind a 25% gas export tax.

“This is the engine room of the cost-of-living crisis – the current tax settings mean that Australian families on low incomes are not keeping up with price rises,” said Dr Richard Denniss, co-CEO of The Australia Institute.

“This problem is easy to fix – targeted tax breaks for low-income earners paid for by ending the giveaway of Australia’s gas resources to multinational exporters.

“The economics is easy. The politics is easier still.

“It is clear the federal government is increasingly out of step with voters when it comes to taking on the gas industry.

“Australians have clearly had enough of our governments giving our gas resources away for free and failing to tax the gas industry properly.

“The big winners would be regional electorates, which have the most low-income earners and, therefore, the most to gain.

“Battlers in regional NSW, Queensland and Victoria are likely to be really important in upcoming elections and this proposal would provide real benefit to those electorates.”