Federal budget 2025
Personal income tax rates
From 1 July 2026, the 16 percent tax rate will drop to 15 percent, followed by a drop to 14 percent from 1 July 2027.
Australian taxpayers may receive an extra tax cut of up to $268 for 2026-27 and up to $536 every year from 2027-28 onwards.
Medicare levy threshold changes
As we have seen in previous years, the government will increase the Medicare levy low-income thresholds from 1 July 2024 by 4.7 percent.
Changes to HELP and student loan repayments
The government has committed to reducing HELP or student loan debt by applying a one-off 20 percent reduction before indexation is next applied on 1 June 2025.
The government will also increase the minimum repayment threshold for HELP and student loan debts from $54,435 in 2024-25 to $67,000 in 2025-26.
HELP repayments will now be calculated only on the income above the new $67,000 threshold, rather than repayments being based on total annual income.
Energy bill relief
The government will continue its energy bill relief measures that were due to expire on 30 June 2025 for an additional two quarters, resulting in two additional quarterly $75 energy bill rebates through to 31 December 2025.
Extension of the Personal Income Tax Compliance Program
The government’s ongoing focus on addressing non-compliance by individual taxpayers continues to be a feature of the allocation of ATO funding in the Budget.
The Personal Income Tax Compliance Program has been allocated $75.7 million over the next four years from 1 July 2025 to continue to deliver a combination of proactive, preventative and corrective activities in key areas of non-compliance.
Restricting foreign ownership of housing
Foreign persons (including temporary residents) will not be able to purchase established dwellings for two years from 1 April 2025. The ATO will be provided funding to enforce the ban.
ATO compliance and support
The ATO is set to receive extra funding for tax compliance activities, focusing on:
Shadow economy behaviors
Non-compliance among individual taxpayers
Ensuring that wealthy groups and medium to large businesses meet their tax and superannuation payment deadlines.
With this increased funding aimed at multinationals and larger taxpayers, we can expect ATO compliance programs to ramp up. Consequently, businesses must ensure they have robust governance in place to fulfill their tax obligations.
While the newly announced personal income tax cuts are modest and delayed, when combined with other cost-of-living relief measures, they should help stimulate demand in the economy, benefiting businesses.
Measures addressing anti-competitive practices will create both challenges and opportunities in a tight labor market. These changes will facilitate labor mobility but will require employers to reassess their employment terms to enhance productivity and curb inflation.
The Budget also offers much-needed support for hospitality venues, brewers, distillers, and wine producers by pausing the indexation on draught beer excise and equivalent customs duty rates for two years starting August 2025. Additionally, the caps on excise remissions and rebates for brewers and producers will rise from $350,000 to $400,000 per annum, effective July 1, 2026.
No reforms to the taxation of family trusts were announced. Similarly, no major changes were made regarding superannuation. However, with Payday Super set to launch on July 1, 2026, businesses will need to prepare for its implications on cash flows and processes.
As the federal election approaches, the pressure is on to pass key measures like Payday Super, the extension of instant asset write-offs, the non-deductibility of ATO interest charges, and other superannuation reforms.
Other business support
$12 million over four years from 2025–26 to support and protect small businesses.
The Government is extending energy bill relief for small businesses until the end of 2025, offering up to $150 in rebates directly off their bills for around one million eligible businesses. Plus, the Energy Efficiency Grants for Small and Medium Enterprises program is rolling out $56.7 million in grants of up to $25,000 to over 2,400 businesses for energy upgrades, like swapping out inefficient appliances and enhancing heating systems.
To support the hospitality sector and alcohol producers, the Government is pausing indexation on draught beer excise and customs duty rates, while increasing support under the existing Excise remission scheme for manufacturers of alcoholic beverages. This move is estimated to save $165 million over five years starting from 2024-25. Additionally, around 1.5 million sole traders will benefit from tax cuts aimed at every taxpayer.
Leveling the Playing Field
The Government is extending Unfair Trading Practice protections to small businesses, addressing the power imbalance they face against larger corporations. To improve conditions for small businesses in franchising, $7.1 million will be allocated over two years to bolster the ACCC's enforcement of the Franchising Code. Protections against Unfair Contract Terms and Unfair Trading Practices will also be extended to businesses governed by this code, pending consultation. Furthermore, Commonwealth Government Business Enterprises will be expected to adhere to 20- day payment terms for contractors and subcontractors.
Digital and Cybersecurity Support
Since the 2023-24 Budget, over $60 million has been dedicated to enhancing small businesses' digital and cyber security capabilities through various programs, including Digital Solutions, Cyber Wardens, and the Small Business Cyber Resilience Service. These initiatives empower small businesses to embrace digital tools, seize online opportunities, and fortify themselves
Instant asset write off
It’s also important to note that the instant asset write off is expiring on the 30th June 2025.
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