On 25 March 2025, the Labor Government handed down the 2025/26 Federal Budget.

It was largely a very quiet Budget, although I was surprised by the tax cuts that were announced. However, it does make some sense because the tax cuts are easily understood and everyone who earns over $20,000 will receive them.

Conversely, the Coalition has since announced that they won’t pass the tax cuts and instead gone for fuel excise cuts and gas supply policies. This is a somewhat contradictory argument to the stage 3 tax cuts that they went to the last election with just a few years ago - but I suppose that's just politics!

Now, I’m no political strategist but, in comparison to Labor’s tax cuts, the Coalition’s plan will be hard for the electorate to determine what it actually means for their hip pocket, because it completely depends on how much fuel and gas you use - both directly and indirectly via consumption of goods and services that use these resources. I'm not sure how you could accurately calculate that?

Anyway, like last year, the 2025/26 Federal Budget has a focus on the cost of living issues facing many Australians. So, strap yourself in for an election campaign focused on these issues.

Let’s get into the main announcements of the budget and what they mean for you.

Taxation

The Government has announced changes to the personal income tax rates that will take effect from 1 July 2026 and again from 1 July 2027.

The changes are a reduction in the marginal tax rate that applies to taxable income between $18,201 and $45,000, with the current rate of 16% reducing to 15% from 1 July 2026, and then to 14% from 1 July 2027.

The following table shows the annual tax saving in 2025/26, 2026/27 and 2027/28 (compared to 2024/25) for selected levels of taxable income.

HECS/HELP Student Loans

Previously announced by the Government in November 2024, changes will be made to reduce the amount of HECS/HELP debt that students (and former students) have outstanding and the rate of repayment.  This will include a 20% reduction in the outstanding level of debt on 1 June 2025, and an increase in the income thresholds before repayments will be required.

Small Business Asset Write Off

Small business taxpayers should be aware that current ability to write off the cost of an asset valued under $20,000 will cease as of 30 June 2025 as this measure was not extended like it had been in previous Budgets.

Superannuation

Superannuation was untouched in this year’s Federal Budget.  However, it is important to be aware of previous announcements that have not yet been implemented, but are arguably still on the table as part of the Government’s superannuation policy into the future. These include the following measures:

• Under indexation in existing legislation, the general transfer balance cap will index from $1.9 million to $2.0 million from 1 July 2025. The changes to the general transfer balance cap may allow current or future retirees to convert more of their superannuation balances to a retirement income stream.
• In line with the indexation of the general transfer balance cap, the total super balance threshold will also index from 1 July 2025 from $1.9 million to $2 million. This threshold is relevant for determining whether a person can make non-concessional contributions to super, and also whether they are able to utilise the bring forward provisions.
• The superannuation guarantee rate (employer contributions), currently 11.5%, will increase to the maximum set under legislation of 12% on 1 July 2025.
• Previously announced in the 2023/24 Federal Budget, from 1 July 2026 employers will be required to pay their employees’ superannuation guarantee entitlements at the same time they pay their salary and wages. This change should enable employees to have greater visibility over whether their entitlements have been paid, and will enable the ATO to recover unpaid super more easily.
• The Government did not make any announcements around its intention to reduce the superannuation tax concessions available to individuals with a total superannuation balance (TSB) above $3 million. This measure, more commonly known as the Division 296 tax, will impose an additional 15% tax on earnings (including unrealised gains) that relate to the proportion of an individual’s superannuation balance that is greater than $3 million, covering amounts that are in either the accumulation or retirement phase.

Aged care

Other than additional funding arrangements there were no additional announcements for aged care in this year’s Federal Budget.  However, it is important to be aware that reforms have already been made that will be effective from 1 July 2025, which may impact the amount required to be paid when accessing aged care services.

Other measures

• The Government will provide households and eligible small businesses a further six-month extension on rebates against their energy bills through to the end of 2025. All households, and around one million small businesses, will be eligible to receive an additional $150 rebate over this period. Rebates will be applied automatically against energy bills, and in installments of $75 per quarter.
• Initially announced on 25 February 2025, the Government will provide greater incentives to medical practices to bulk bill the cost for all patient visits from 1 November 2025, through the provision of increased additional rebates. The aim of this measure is to incentivise more practices to bulk bill Medicare for all patients that visit, which would then eliminate the need for patients at these practices to fund any gap payments.
• The Government will expand its Help to Buy scheme, aimed at assisting Australians to purchase their first home. Under the scheme, the Government provides up to a 40 per cent equity contribution to support eligible home buyers purchase a home with a lower deposit and a smaller mortgage. Changes announced will lift the income cap for both singles and joint applicants looking buy a home.

It is always important to remember that at this point, most Budget night announcements are only statements of intended change and are not yet law.  There may be others that impact on your personal situation, as well as other opportunities available from changes made in prior years.  A financial adviser can help outline what these measures may mean for you, and the opportunities available now, or in the future.

Until next time, all the best.

Wayne