The Federal Budget was handed down on 25 March 2025, and has outlined a number of changes that impact businesses, tax & individuals.
New Personal Income Tax Cuts From 1 July 2026
The Government will introduce further tax cuts for all Australian taxpayers, building on the first round of reductions rolled out in July 2024. Under these changes:
- From 1 July 2026, the 16% tax rate for incomes between $18,201 and $45,000 will drop to 15%.
- It will then be further reduced to 14% from 1 July 2027.
This means taxpayers will save up to $268 per year from 2026 and up to $536 per year from 2027.
Increase To The Medicare Levy
From 1 July 2024, the Government will raise the Medicare levy lowincome thresholds by 4.7% for singles, families, seniors, and pensioners. This adjustment ensures that over one million lower-income Australians will either remain exempt from the levy or continue to pay a reduced rate.
- The threshold for singles will be increased from $26,000 to $27,222. The family threshold will be increased from $43,846 to $45,907.
- The threshold for single seniors and pensioners will be increased from $41,089 to $43,020. • The family threshold for seniors and pensioners will be increased from $57,198 to $59,886.
- The family income thresholds will increase by $4,216 for each dependent child or student, up from $4,02
Support For Students And Graduates
The Government will reduce outstanding student debts by 20 percent, removing $16 billion in debt. It will also make the repayment system fairer by moving to a marginal repayment system with a higher minimum repayment threshold. These changes will deliver significant cost-of-living relief to Australians with student debt, allowing them to keep more of what they earn. The Government has already legislated a cap on HELP indexation based on the lower of the Consumer Price Index or the Wage Price Index. The change was backdated to 1 June 2023 and has reduced outstanding student debt by around $3 billion.
Tax Compliance Measures Announced
The Government is increasing funding for the Tax Practitioners Board to enhance compliance efforts, focusing on high-risk tax practitioners. Additionally, it plans to make it easier for tax agents returning from a career break to re-enter the profession. These measures are part of the Government’s response to the PWC matter and align with recommendations from the 2019 Independent Review of the Tax Practitioners Board. Over the next four years, nearly $1 billion will be allocated to extend and expand tax compliance initiatives, ensuring a fairer and more transparent tax system:
- $717.8 million (from 1 July 2025) to extend the Tax Avoidance Taskforce for two years and expand it for an additional year. This funding will strengthen the ATO’s ability to monitor tax compliance among multinationals and large taxpayers.
- $155.5 million (from 1 July 2025) to expand the Shadow Economy Compliance Program. This initiative targets tax evasion in sectors such as worker exploitation, underreported income, and illicit tobacco trade, preventing noncompliant businesses from gaining an unfair advantage.
- $75.7 million (from 1 July 2025) to continue and expand the Personal Income Tax Compliance Program. The ATO will enhance proactive, preventative, and corrective measures to address key areas of non-compliance.
- $50 million (from 1 July 2026) to extend the Tax Integrity Program for three years. This funding will allow the ATO to engage with medium and large businesses, as well as wealthy individuals, to ensure timely tax and superannuation payments.
Additional Energy Bill Relief To Reduce Cost-Of-Living Pressures
To help households and small businesses manage energy costs, the Government is committing an extra $1.8 billion to extend energy bill relief until the end of 2025. Over 10 million households and one million small businesses will receive two additional $75 quarterly rebates throughout 2025 ($25 per month), which will be paid directly to their energy supplier.
Tackling Excessive Surcharges
To ensure fairer pricing at checkouts, the Government is strengthening compliance measures against excessive card surcharges. The ACCC will receive additional funding to monitor businesses and increase public awareness of surcharge regulations. The Government is also considering banning debit card surcharges, pending further work by the RBA to balance benefits for both consumers and small businesses. In the
meantime, the ATO and Services Australia have already stopped passing on debit card surcharges from 1 January 2025.
Expanding The Help to Buy Scheme
The Government is expanding the Help to Buy scheme to support Australians to buy homes with lower deposits and smaller mortgages. This Budget is committing around $800 million to lift the property price and income caps to make the scheme more accessible. Under the scheme, the Government will provide an equity contribution of up to 40 per cent to support eligible home buyers to buy a home with a lower deposit and smaller mortgage, helping around 40,000 Australian households locked out of the market into home ownership.
Supporting Renters & Affordable Housing
To strengthen renters’ rights, the A Better Deal for Renters initiative introduces clearer eviction rules and limits rent increases to once per year. The Government is also encouraging investment in build-torent developments, with tax measures expected to support 80,000 new long-term rental homes over the next decade.
Energy Efficiency Grants
The Government is investing $56.7 million in Energy Efficiency Grants for Small and Medium Enterprises, to be delivered over two funding rounds. Businesses can access grants of up to $25,000 to improve energy efficiency by upgrading appliances, heating systems, and other energy-intensive operations.
Housing Support
The Government will provide $58.8 million over five years from 2024–25 to increase support for housing, including:
- $54.0 million over four years from 2024–25 to increase the supply and adoption of prefabricated and modular housing construction, including:
- $49.3 million over two years from 2025–26 to support states and territories to scale up existing projects for prefabricated and modular housing construction
- $4.7 million over four years from 2024–25 to develop a voluntary certification and rating scheme for prefabricated and modular housing manufacturers. Costs for the scheme will be recovered from industry from 2028–29 onwards.
- $4.9 million over four years from 2025–26 to continue the Regional Home Guarantee and Family Home Guarantee streams of the Home Guarantee Scheme.
- The Government will also provide $0.8 billion in additional investment in the Help to Buy program, bringing total equity investments to $6.3 billion, through increasing property price caps and increasing income caps from $90,000 to $100,000 for singles and from $120,000 to $160,000 for joint applications.
National Anti-Scam Centre
The Government will provide $6.7 million in 2025–26 to extend the operation of the National Anti-Scam Centre within the Australian Competition and Consumer Commission to continue protecting consumers and businesses from scam activity.
Small Business and Franchisee Support and Protection
The Government will provide $12.0 million over four years from 2025– 26, to support and protect small businesses. Funding includes:
- $7.1 million over two years from 2025–26 for the Australian Competition and Consumer Commission to strengthen regulatory oversight of the Franchising Code of Conduct.
- $3.0 million over four years from 2025–26 for the Australian Securities and Investments Commission to improve its data analytics capability to better target enforcement activities to deter illegal phoenixing activities, particularly in the construction sector.
- $1.2 million in 2025–26 to partner with White Box Enterprises to establish a Social Enterprise Loan Fund to offer small loans to social enterprises, including work integration social enterprises, to support employment for disadvantaged Australians.
- $0.8 million in 2025–26 for the Treasury to develop and consult on options to extend protections against unfair trading practices to small businesses and protect businesses regulated by the Franchising Code of Conduct from unfair contract terms and unfair trading practices.
More Tax Cuts on the Way for Australian Workers
Good news for Australian taxpayers – more tax cuts are coming!
Following the first round of tax reductions, which began in July 2024, the Government has announced additional cuts in 2026 and 2027 in the 2025-26 Budget, aiming to put more money back into people’s pockets.
From 1 July 2026, the tax rate on incomes between $18,201 and $45,000 will drop from 16% to 15%, and a year later, it will be reduced further to 14%. This means an average worker will see an extra $268 in savings in 2026–27 and $536 per year from 2027–28.
When combined with earlier tax cuts, Australians on average earnings will receive up to $2,190 in tax relief per year from 2027–28. Across all taxpayers, the average annual savings are expected to be $2,548, or about $50 a week – offering significant relief in a time of rising living costs.
These cuts are expected to ease financial pressure and boost workforce participation, particularly among women, who are projected to increase their working hours by 900,000 per week.
More Families to Benefit from Childcare Subsidy Changes
Families with young children will soon have better access to subsidised childcare, following recent changes passed by the government. From January next year, parents will be guaranteed at least three days of subsidised childcare, regardless of how much they work or study, provided their household income is under $533,280.
This change marks a major shift, as it removes the activity test requirement introduced in 2018. Previously, parents needed to work, study, or volunteer to qualify for childcare subsidies. The removal of this test is expected to benefit around 66,700 families in the first full year, with another 100,000 families gaining access to additional care hours.
The government currently spends around $15 billion annually on childcare subsidies and has also committed $1 billion to build over 160 new childcare centres in areas with the greatest need.
For parents, this initiative offers much-needed financial relief and flexibility, making quality childcare more accessible. By ensuring more children can attend early learning, the changes also support better longterm educational outcomes. These reforms reflect a broader commitment to supporting working families and improving early childhood education across the country.
Extra Energy Bill Relief for Households and Small Businesses
From 1 July, households and around one million small businesses will receive an extra $150 off their energy bills, as part of a new $1.8 billion government initiative announced in the Federal Budget.
This extends the existing power bill relief until the end of 2025, offering continued financial support amid rising living costs.
The announcement comes as the $300 rebates introduced in last year’s budget are set to expire on 30 June 2025. Under the new plan, eligible recipients will receive two $75 rebates directly off their electricity bills by 31 December 2025.
With bipartisan support—after the Coalition pledged to match the relief—this measure aims to ease cost-of-living pressures while keeping downward pressure on electricity prices. So far, Commonwealth and state energy bill relief has helped lower electricity price increases, with prices falling 25.2% across 2024.
The additional rebates build on the nearly $5 billion in energy bill relief already delivered, helping households and businesses manage expenses while broader energy affordability and sustainability solutions are explored.
The Instant Asset Write-Off – Nothing Announced In The Budget
The Government has extended the Instant Asset Write-Off for years – sometimes at $20,000, or even higher during COVID. Though originally introduced as a temporary measure during the GFC, it has been renewed annually ever since – until now.
This means that from this year, small businesses will need to depreciate any asset purchase over $1,000 instead of claiming an immediate tax deduction. While the long-term financial impact is minimal – you still get the deduction, just spread over time – businesses will now face larger and more complex depreciation schedules.
To benefit from the Instant Asset Write-off, you will need to purchase assets before 30 June, as waiting will mean a slower tax deduction.
Other tax-related budget measures
Strengthening tax integrity
The Government will provide $999 million over four years to the ATO to extend and expand tax compliance activities. This additional funding will support the following compliance activities:
- Extension and expansion of the Shadow Economy Compliance Program to reduce shadow economy behaviour such as worker exploitation, under-reporting of taxable income, illicit tobacco and other activity that enables non-compliant businesses to undercut competition.
- Extension and expansion of the Personal Income Tax Compliance Program. This will enable the ATO to continue to deliver a combination of proactive, preventative and corrective activities in key areas of non-compliance.
- Extension of the Tax Integrity Program. This will enable the ATO to continue its engagement program to ensure timely payment of tax and superannuation liabilities by medium and large businesses and wealthy groups.
- A two-year expansion and a one-year extension of the Tax Avoidance Taskforce. This supports continued tax compliance scrutiny on multinationals and other large taxpayers.
Restricting Foreign Ownership of Housing
The Government will take action to ensure foreign investment in housing supports the Government’s broader agenda to boost Australia’s housing supply in the following ways:
- Banning foreign persons (including temporary residents and foreign-owned companies) from purchasing established dwellings for two years from 1 April 2025, unless an exception applies. Exceptions to the ban will include investments that significantly increase housing supply or support the availability of housing on a commercial scale, and purchases by foreign-owned companies to provide housing for workers in certain circumstances.
- Providing the ATO with $5.7 million over four years, from the 2026 income year, to enforce the ban.
- Providing the ATO and Treasury with $8.9 million over four years from the 2026 income year and $1.9 million per year ongoing from the 2030 income year to implement an audit program and enhance its compliance approach to target land banking by foreign investors. The enhanced compliance approach by the ATO and Treasury to target land banking will ensure foreign investors comply with requirements to put vacant land to use for residential and commercial developments within reasonable timeframes.
Small Business and Franchisee Support and Protection
The Government will provide $12 million over four years from the 2026 income year to support and protect small businesses. The funding will support the following:
- The ACCC to strengthen regulatory oversight of the Franchising Code of Conduct.
- The Australian Securities and Investments Commission (‘ASIC’) to improve its data analytics capability to better target enforcement activities to deter illegal phoenixing activities, particularly in the construction sector.
- Partnering with White Box Enterprises to establish a Social Enterprise Loan Fund to offer small loans to social enterprises, including work integration social enterprises, to support employment for disadvantaged Australians.
- Treasury to develop and consult on options to extend protections against unfair trading practices to small businesses and protect businesses regulated by the Franchising Code of Conduct from unfair contract terms and unfair trading practices.
Support for Hospitality Sector and Alcohol Producers
The Government will increase support for hospitality venues, brewers, distillers and wine producers through changes to the alcohol tax settings in Australia.
The Government will pause indexation on draught beer excise and excise equivalent customs duty rates for a two-year period, from August 2025.
Under this measure, biannual indexation of draught beer excise and excise equivalent customs duty rates due to occur in August 2025, February 2026, August 2026 and February 2027 will not occur. Biannual indexation will then recommence from August 2027.
The Government will also increase support available under the existing Excise remission scheme for manufacturers of alcoholic beverages (the ‘Remission scheme’) and Wine Equalisation Tax (‘WET’) producer rebate (‘Producer rebate’).
Currently, all eligible brewers and distillers can receive an excise remission under the Remission Scheme up to a cap of $350,000. All eligible wine producers can currently receive a WET rebate up to a cap of $350,000 under the Producer rebate. This measure will increase the caps for all eligible brewers, distillers and wine producers to $400,000 per financial year, from 1 July 2026.
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The information contained in this publication is for general information purposes only, professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.