The 2025 Federal Budget introduces key financial updates aimed at easing cost-of-living pressures, adjusting tax settings, and refining superannuation rules. These changes may impact income, savings, and retirement planning. Below is a breakdown of the major proposals and what they mean for individuals and businesses.

  1. Personal Income Tax Measures
  • From 1 July 2026, the 16% tax rate on incomes between $18,201 and $45,000 will drop to 15%, and then further reduce to 14% from 1 July 2027.
  • The Medicare levy low-income threshold will increase, ensuring more low-income earners either pay a reduced levy or none at all.
    • Single threshold: $27,222 (up from $26,000 in 2024).
    • Families: $45,907 (up from $43,846 in 2024).
    • Seniors and pensioners: $43,020 for singles and $59,886 for families.
  • These changes will lower tax burdens on individuals and families, providing more disposable income.
  1. Energy Bill Support
  • The Government will provide two $75 energy bill rebates to eligible households and small businesses, valid until 31 December 2025.
  • This measure is an extension of previous relief initiatives aimed at mitigating rising energy costs.
  1. Superannuation and Division 296 Tax
  • The Government is proceeding with the Division 296 tax, which applies an additional 15% tax on super earnings for individuals with balances exceeding $3 million, effective from 1 July 2025.
  • This measure remains controversial, with criticism from industry experts and a pledge from the Opposition to repeal it if elected.
  • Financial advisors recommend that individuals potentially affected wait until the bill becomes law before making withdrawal decisions.
  1. Student Loan Relief
  • From 1 July 2025, student loan debts under the Higher Education Loan Program (HELP) will be reduced by 20%.
  • The income threshold for repayments will increase from $54,435 in 2025 to $67,000 in 2026, reducing the financial burden on graduates before repayments begin.
  1. Childcare Subsidies
  • From 1 January 2026, families earning under $533,280 per year will be eligible for government-subsidized childcare for at least three days per week.
  • This initiative aims to make childcare more accessible and affordable for working families.
  1. Strengthening Medicare & Pharmaceutical Benefits Scheme (PBS)
  • The Government will expand bulk billing incentives, encouraging more healthcare providers to offer bulk-billed services.
  • Prescription medicine costs will decrease for Medicare cardholders under the Pharmaceutical Benefits Scheme (PBS).
  • These measures aim to improve healthcare affordability and accessibility.
  1. Women’s Healthcare Support
  • A Women’s Health Package will subsidize contraception, menopause treatments, and endometriosis medication.
  • This initiative addresses gaps in women’s healthcare affordability.
  1. Tax Practitioner Regulation and Compliance
  • The Government will invest in strengthening tax integrity by allocating $999 million over four years to the ATO to:
    • Combat shadow economy behavior such as tax evasion and illicit activities.
    • Improve personal income tax compliance and ensure timely tax payments.
    • Extend the Tax Avoidance Taskforce to scrutinize multinational corporations and large taxpayers.
  1. Foreign Investment and Housing Market Regulation
  • A two-year ban (starting 1 April 2025) on foreign persons purchasing established dwellings unless they significantly contribute to housing supply.
  • Increased ATO funding to enforce land banking regulations for foreign investors, ensuring vacant land is developed within reasonable timeframes.
  1. Support for Small Businesses and Franchisees
  • The Government will allocate $12 million over four years to:
    • Strengthen regulatory oversight of the Franchising Code of Conduct.
    • Enhance ASIC’s enforcement against illegal phoenixing activities, particularly in construction.
    • Support small business loan programs, improving access to funding for social enterprises.
  1. Hospitality Sector and Alcohol Tax Relief
  • A two-year pause (August 2025 to August 2027) on draught beer excise indexation, reducing costs for hospitality businesses.
  • The Excise Remission Scheme cap for brewers, distillers, and wine producers will increase from $350,000 to $400,000 per year from 1 July 2026.
  1. Competition Law and Worker Protections
  • The Government will ban non-compete clauses for workers earning less than $175,000 per year.
  • Loopholes allowing wage-fixing agreements and no-poach clauses will be closed to promote fairer labor markets.

Conclusion

The 2025 Federal Budget introduces a range of policies aimed at reducing cost-of-living pressures, supporting small businesses, and strengthening tax compliance.

Key takeaways include:

  • Lower income tax rates and increased Medicare levy thresholds.
  • Energy bill rebates and student loan relief.
  • Childcare subsidies and women’s healthcare improvements.
  • Tax integrity measures targeting multinationals and the shadow economy.
  • Superannuation changes, including the Division 296 tax.

These measures are expected to have significant impacts on taxpayers, businesses, and investors. Individuals should consider consulting financial professionals to optimize their tax and investment strategies in response to these changes.

Disclaimer: The above information is general in nature and at the time of publication these were proposed changes