The federal government handed down its 2025-26 budget last night delivering some energy relief and tax cuts in the hope of tackling the cost-of-living crisis.
As highly predicted, the government delivered a Budget Deficit, estimated at $27.6 billion, with an estimated projected deficit of $42 billion for the next Financial Year.
Here is a breakdown of some of the key measures from a taxation and business perspective.
Personal Income Tax
Income tax cuts
In addition to the first round of tax cuts which commenced on 1 July 2024, the government confirmed personal income tax cuts commencing 1 July 2026, with further tax cuts from 1 July 2027.
The Government will cut income taxes further over two years:
- From 1 July 2026, the 16 per cent tax rate, which applies to taxable income between $18,201 and $45,000, will be reduced to 15 per cent.
- From 1 July 2027, this tax rate will be reduced further to 14 per cent.
The first tax cut will provide a benefit of $268 to most taxpayers, with the second tax cut providing a tax benefit of up to $536.
The Government’s combined tax cuts (for FY25, FY27 and FY28) are expected to provide an average tax cut of $2,548 in 2027–28, or around $50 per week, relative to FY24 tax settings.
Increased Medicare Levy Threshold
From 1 July 2024, the government will increase the Medicare levy low-income thresholds by 4.7 per cent for singles, families and seniors and pensioners. This will exempt over one million Australian on lower incomes from paying the Medicare Levy.
Businesses
Small Business Support – Extending Energy Bill Relief
The Federal Government announced $1.8 billion to extend the energy bill relief for eligible small businesses. This extension will continue until to 31 December 2025, and eligible small businesses will receive two $75 (up to $150 in total) rebates.
The rebate will be applied by way of discount through by their electricity provider.
Australian Businesses
The government is providing support to Australian producers through the Buy Australian Campaign. The $20 million campaign aims to encourage consumers to buy Australian-made products.
Instant Asset Write-Off
This year’s Budget does not include an extension or increase to the Instant Asset Write-Off threshold. After being set at $20,000 in the previous two Budgets, the threshold is set to drop back to $1,000 from 1 July 2025.
Limiting non-compete clauses
Non-compete clauses are to be banned from 2027 for employees on up to $175,000 wage. The Government will also close loopholes in competition laws that allow businesses to limit pay and conditions or prevent staff from being hired by competitors without workers’ knowledge or consent.
Construction employers and apprentices
From 1 July 2025, through the Key Apprentice Program, eligible apprentices can receive up to $10,000 on top of their wages over the duration of their apprenticeship.
The Priority Hiring Incentive will be extended until 31 December 2025 to assist construction employers with apprentices in priority occupations for up to $5,000.
International
Restricting foreign ownership of housing
The government has announced that it will take action to ban foreign investors (including temporary residents and foreign-owned companies) from purchasing established homes from 1 April 2025 until 31 March 2027.
Exceptions to this proposed ban include:
- Investments that significantly increase or support the availability of housing supply on a commercial scale;
- Purchases by foreign owned companies to provide housing for workers in certain circumstances; and
- The Pacific Australia Labour Mobility (PALM) scheme. The ATO and Treasury will publish updated policy guidance before the commencement of these changes.
The government will also provide $5.7 million in funding to the Australia Taxation Office over four years to enforce the ban.
Other
Student Debt
The government has announced that it will reduce all outstanding Higher Education Loan Program (HELP) and other student debts by 20 per cent, removing an estimated $16 billion from the student loan accounts of 3 million Australians.
The government is also looking to reform the student loan repayment system from 1 July 2025, as well as increasing the amount that individuals must earn before they are required to start making repayments on loans from $54,435 in 2024-25 to $67,000 in 2025-26.
These changes are subject to the passage of legislation.
Our full summary of the measures and start dates can be found here: Federal-Budget-2025-26 Summary
The Federal Government Budget papers can be found here: link: Budget documents | Budget 2025-26
We will provide more information once these measures have been legislated.
Should you have any questions or need any help ensuring you receive all available assistance, please reach out to our team and we will endeavour to do our best to assist.
The team at Rose Partners
