2025/26 Federal Budget
The 2025/26 pre-election Federal Budget handed down this week included a small number of tax, cost of living and other measures.
While it was limited and in some cases lacking, particularly for small business and superannuation, we have outlined some of the key and most relevant items as follows.
New tax cuts for individuals in 2027 and 2028
If elected, the Government will deliver new tax cuts for individual taxpayers commencing from 1 July 2026 (ie from the 2027 income year) by progressively reducing the percentage rate for the income threshold between $18,201 and $45,000 from 16% currently to 14% in 2028.
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.
A breakdown and more information on this can be found here at the Australian Taxation Office website.
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.
These thresholds will be incorporated in the Medicare levy calculation for taxpayers in their 2025 tax return lodgement, and reflect the level at which no Medicare levy will be payable up to these amounts.
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:
Single individual | $27,222 (2025) | $26,000 (2024)
Families not eligible for the SAPTO | $45,907 (2025) | $43,846 (2024)
Single individual eligible for the SAPTO | $43,020 (2025) | $41,089 (2024)
Families eligible for the SAPTO | $59,886 (2025) | $57,198 (2024)
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.
Student loan debts
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.
Expansion to Help to Buy scheme for first home buyers
Under the Help to Buy scheme, the Government will provide an equity contribution of up to 40% to support eligible home buyers to purchase a home with a lower deposit and a smaller mortgage.
The Government will boost the scheme by increasing income caps from $90,000 to $100,000 for individuals and from $120,000 to $160,000 for joint applicants and single parents.
Property price caps will also be increased and linked with the average house price in each state and territory, rather than dwelling price.
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.
Banning non-compete clauses for low and middle income workers
The Government will ban non-compete clauses that apply to workers earning less than the high- income threshold in the Fair Work Act (currently $175,000). The Government will also close loopholes in competition law that currently allow businesses to:
fix wages by making anti-competitive arrangements that cap workers’ pay and conditions, without the knowledge and agreement of affected workers; and
use ‘no-poach’ agreements to block staff from being hired by competitors.
Please contact our team if you would like to discuss the above or any other measures from this years’ budget.