The Federal Budget was released on Tuesday night and we’ve summed up all the important topics for you! We think the below highlights will have the biggest impact for our clients.
It is important to note these are all anticipated measures, pending the outcome of the upcoming Federal election.
New tax cuts for individuals
The Government will deliver new tax cuts to individual taxpayers commencing from 1 July 2026 (i.e., from the 2027 income year). Under the new tax cuts, it is proposed that:
- the (current) 16% tax rate will be reduced to 15% from 1 July 2026; and
- the 15% tax rate will be further reduced to 14% from 1 July 2027.
The personal income tax rates (excluding the Medicare levy) for the 2025 and 2026 income years are set out in the following table, along with the proposed changes to the tax rates for the 2027 and 2028 income years:
| Thresholds | 2025 and 2026 income years | 2027 2028 income year income year | |
| $0 – $18,200 | Tax-free | Tax-free | Tax-free |
| $18,201 – $45,000 | 16% | 15% | 14% |
| $45,001 – $135,000 | 30% | 30% | 30% |
| $135,001 – $190,000 | 37% | 37% | 37% |
| $190,001+ | 45% | 45% | 45% |
By way of example, a taxpayer earning between $18,201 and $45,000 will get a tax cut of up to $268 in the 2027 income year and up to $536 from the 2028 income year.
Making student loans fairer
As previously announced by the Prime Minister on 3 November 2024, the Government will reduce all outstanding Higher Education Loan Program (‘HELP’) and other student debts by 20%, subject to the passage of legislation. The 20% reduction is in addition to the recent indexation reforms.
The Government is also increasing the amount that people can earn before they are required to start paying back their loans, from $54,435 in the 2025 income year to $67,000 in the 2026 income year.
Energy bill relief
The Government is extending energy bill relief by providing eligible households and small businesses with two $75 bill rebates directly off their electricity bills until 31 December 2025 to provide cost-of-living relief.
Training incentives for eligible construction apprentices
From 1 July 2025 eligible apprentices in housing construction occupations will receive up to $10,000 in financial incentives, over the life of their apprenticeship. This is to encourage more people into the housing construction trades and provide apprentices with cost-of-living support. By creating a Housing Construction Apprenticeship stream, it is anticipated to help address shortages and deliver on a target to build 1.2million homes over the next five years.
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.
Increased Medicare levy low-income thresholds
The Government will increase the Medicare levy low-income threshold amounts and phase-in ranges for single individuals, families and seniors and pensioners that apply from 1 July 2024 to provide cost-of-living relief, as set out in the table below.
The increase to the thresholds ensures that low-income individuals continue to be exempt from paying the Medicare levy or pay a reduced levy rate.
The Medicare levy low-income thresholds for single individuals and families for the 2025 income year, together with the comparative thresholds for the 2024 income year, will be as follows:
| Category of taxpayer | No Medicare levy payable at or below: | |
| 2025 2024 | ||
| Single individual | $27,222 | $26,000 |
| Families not eligible for the SAPTO | $45,907 | $43,846 |
| Single individual eligible for the SAPTO | $43,020 | $41,089 |
| Families eligible for the SAPTO | $59,886 | $57,198 |
For each dependent child or student, the family income thresholds will increase by a further $4,216 (up from $4,027).
Read the full budget lowdown
The above highlights from the Budget are our top picks we feel will most impact our clients. You can see our full 2025/26 Budget highlights that may impact your or your business here. Download now to find out more!
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