On March 25, 2025, at 7:30 pm (AEDT), the Federal Treasurer, Dr. Jim Chalmers, delivered the 2025–26 Federal Budget. Here we share some key highlights:
The Budget emphasises cost-of-living support, housing, education, and health:
1. Individual tax cuts include a reduction in the marginal tax rate for the personal income tax
- threshold bracket from $18,201 to $45,000 from 16% to 15%, starting July 1, 2026, and
- further reducing to 14% from July 1, 2027.
2. The Medicare levy low-income thresholds will be increased from July 1, 2024:
- Threshold for singles: from $26,000 to $27,222
- Threshold for families: from $43,846 to $45,907
- Threshold for single seniors and pensioners: from $41,089 to $43,020
- Threshold for senior/pensioner families: from $57,198 to $59,886
Student loan debts will be reduced by 20%, removing a total of $16 billion in debt, and reforms will be made to the student loan repayment system from July 1, 2025, increasing the minimum repayment threshold from $54,435 to $67,000.
Foreign individuals will be banned from purchasing existing homes for two years starting April 1, 2025, unless exceptions apply for investments that significantly increase housing supply or provide worker housing.
Increased funding of $999 million over four years will be allocated to the ATO to extend and expand tax compliance activities, including $717.8 million for the Tax Avoidance Taskforce, $155.5 million for the Shadow Economy Compliance Program, $75.7 million for the Personal Income Tax Compliance Program, and $50 million for the Tax Integrity Program.
Additional measures include strengthening tax practitioner regulation and compliance by modernising the registration framework and providing more sanctions to the Tax Practitioners Board.
Providing $207 million over two years to the ASIC for business register stabilization and uplift, and $8.7 million over three years to the OAIC to support enforcement activity.
Freezing indexation on draught beer excise and excise equivalent customs duty rates for a two-year period starting August 2025. Increasing the excise remission cap and Wine Equalisation Tax producer rebate from $350,000 to $400,000 each financial year starting July 1, 2026.
Extending additional tariffs on goods from Russia and Belarus by a further two years.
Economic Impact and Budget Deficit
- The Budget includes new tax cuts totalling $17.1 billion over the next four years, starting in 2026-27. Each 1% tax cut for the $18,201 to $45,000 bracket equates to $268 per annum.
- The budget deficit is projected to grow from $27.6 billion in 2024-25 to $42.1 billion in 2025-26.
- Gross public debt is expected to exceed $1 trillion during the course of 2025-26 and reach 37% of GDP by 2028-29 before trending down.
- Spending as a share of GDP is projected to average 26.7% over the longer term, compared to the pre-Covid average of 24.8%. Despite a small reduction due to the mini tax cuts, revenue starts trending up from 2028-29 reaching a record 26.7% of GDP in a decade as bracket creep kicks in again.
Social and Infrastructure Initiatives
- $7.9 billion allocated to boost Medicare bulk billing over four years to expand eligibility for bulk billing incentives and introduce the new Bulk Billing Practice Incentive Program for general practices if they bulk bill every visit under Medicare.
- $1.8 billion allocated for public hospitals and the establishment of new urgent care clinics, with $644 million specifically for new urgent care clinics and $793 million for women's health.
- $7.2 billion allocated for the Bruce Highway and various other road and rail projects.
- $1.2 billion allocated for disaster relief and rebuilding after Cyclone Alfred.
- Energy bill relief fund extended with $1.8 billion allocated for rebates, continuing energy bill rebates of $75 per quarter for eligible Australian households and small businesses until December 31, 2025.
- $784.6 million over four years allocated to lower the Pharmaceutical Benefits Scheme (PBS) general patient co-payment from $31.60 to $25.00 starting January 1, 2026.
- Additional funds include $50 million over three years to extend the Tax Integrity Program, $8.9 million for the ATO and Treasury to implement an audit program targeting land banking by foreign investors, and $5.7 million for the ATO to enforce the ban on foreign individuals purchasing existing homes.