Treasurer Jim Chalmers is set to deliver a Covid-era form of tax relief for businesses  to help Australians steer themselves through the cost-of-living crisis. 

Chalmers is planning a 'loss carry-back' proposal in the upcoming federal budget, due to be handed down on Tuesday, amid persistent inflation and soaring prices caused by the ongoing conflict in the Middle East, The Australian reported.

A 'loss carry-back tax offset' was introduced in the 2019-20 financial year and again in 2022–23 for business owners.

The policy allows eligible companies to claim a refund for previously paid income tax on earlier profits if they post a loss. 

It was brought in by the 2020 Coalition government in its 'Covid-19 recovery' budget, with refunds estimated to have reached as high as $5billion.

The aim of the revived policy is to support businesses in the wake of soaring prices resulting from the conflict in the Middle East.

In its Statement of Monetary Policy on Tuesday, the Reserve Bank of Australia reported that increases in fuel prices pushed up consumer price inflation in many economies across the world during March.

But, prior to the war, Australian economic conditions looked poor for businesses.

'More timely data suggests there was a little less underlying momentum in consumer spending at the start of this year than previously assessed,' the RBA noted. 

'The increase in fuel prices has contributed to a large deterioration in consumer and business sentiment. 

'The pass-through by firms of fuel cost increases to other consumer goods and services is expected to take place from the June quarter onwards.'

The Albanese government is also considering a rise in minimum spending thresholds to be eligible for research and development subsidies, and changes to the treatment of venture capital. 

However, RBA Governor Michele Bullock issued a warning about 'government stimulus' after the bank announced a cash rate hike to 4.35 per cent.

The term 'government stimulus' refers to targeted action by governments or central banks to boost economic activity during downturns, recessions, or crises. 

It can take the form of increased spending, tax cuts or reduced interest rates.

'The extent to which (the) government makes up (budget) shortfalls for households by giving them more money makes it harder to dampen demand,' Ms Bullock said. 

She added that, even before the Iran conflict broke out, demand in Australia was above supply, which raised prices.

'The ability of the economy to supply the goods and services that were being demanded in total, including by government and by the private sector, was outstripping the ability of the economy to supply it,' Ms Bullock said.

'That's why inflation was rising.'

But Chalmers has maintained Ms Bullock's criticism was based on a hypothetical scenario when questioned by Today show host Karl Stefanovic.

'Obviously, I don't see it that way. Karl, this will be a really responsible budget, because we take this inflation challenge in our economy seriously, because we know that people are under pressure,' he said on Wednesday.

'The Governor was asked a hypothetical question about some budget speculation that there'd be a heap more stimulus in the budget.

'There won't be a heap more stimulus in the budget. In fact, the budget will wind back spending overall. There won't be a heap of new stimulus in the budget.'

Chalmers said this week his budget will be focused on fuel security, addressing inflation, boosting productivity and resilience, and on managing global economic uncertainty.

There has been speculation that the Albanese government may introduce a new capital gains tax regime, based on how long an asset is owned. 

It may also announce a minimum tax rate, ranging between 25 and 30 per cent, on trust distributions, which would align them with the rate that applies to companies. 

A one-off tax break for Australian workers has also been considered, which could see an offset of between $200 and $300 for earned income rather than investments.