The Federal Government presented its 2025-26 budget on March 25, headlined by a range of tax related measures attempting to provide cost of living relief. Other notable measures include an extension of the energy bill rebate and a reduction in HELP debt for students.
IN BRIEF
The threat of global trade war and tariff tensions continue to create a volatile and unpredictable global economic outlook
Inflation is expected to hit 3% in 2025-26 but sustainably return to the RBA's target band of 2-3% around the middle of 2025, which is around 6 months earlier than anticipated
Unemployment is projected to peak lower at 4.25%
The Government expects to record a budget deficit of $27.6bn for 2024-25.
This is a $0.7bn deterioration compared with the December MYEFO projections which is a notable turnaround from a $15.8 billion surplus recorded in 2023–24. The Government projects deficits will continue, forecasting it to rise to $42.1bn (1.5% of GDP) in 2025–26.
KEY POINTS
Personal taxation
Personal tax rates cut from 1 July 2026 and 2027
The Government has proposed to cut the personal income tax rate for the income threshold ($18,200 - $45,000) from 16% to 15% (from 1 July 2026) and 14% (from 1 July 2027). Under the proposed changes, every Australian taxpayer will receive a tax cut of up to $268 from 1 July 2026, rising to $536 from 1 July 2027.
Medicare levy low-income thresholds
For the 2024-25 income year, the Medicare levy low-income threshold has been increased. To check how much it has increased for you, visit this link.
Business taxation
Taxpayer compliance
The ATO is to receive another significant increase in funding to enforce taxpayer compliance. The Government will provide $999.0 million over 4 years for the ATO "to extend and expand tax compliance activities".
Extra funding and sanctions for the Tax Practitioners Board
The Government will provide extra funding to allow the Tax Practitioners Board to undertake additional compliance operations targeting high-risk tax practitioners. This will take place over 4 years from 1 July 2025.
MIT measures
The Government intends to "clarify" the tax arrangements for managed investment trusts.
Start dates deferred for Foreign resident Capital Gains Tax and Clean Building MITs
The Extending the clean building managed investment trust withholding tax concession has been changed from 1 July 2025 to the first 1 January, 1 April, 1 July or 1 October after the Act receives assent.
The Strengthening the foreign resident capital gains tax regime has been changed from 1 July 2025 to 1 October 2025 or the first 1 January, 1 April, 1 July or 1 October after the Act receives assent.
More additions to charities register
Tax law will be amended to list six more organisations as deductible gift recipients (DGRs).
Superannuation
The Government did not announce any new major super measures.
Other measures
Extended Govt energy bill rebate: extra $150 for 2025
The Government will extend its energy bill rebate until the end of 2025 by providing a further 2 instalments of $75 for households and small businesses.
Help to Buy home scheme expanded
Equity investment in the Help to Buy scheme will be increased to $6.3bn (up $800m). The income and price caps will also be increased.
Early childhood education: child care subsidy
Services Australia will receive $4.5m over 4 years from 2025-26 to make system changes to implement the Child Care Subsidy Three Day Guarantee. This aims to ensure families are entitled to at least 3 days a week of subsidised early childhood education and care.
Extending subsidies for apprentices and fee-free TAFE
The Government will provide $722.8m over 4 years from 2025-26 to deliver increased support for apprentices. Funding will be used to expand the Key Apprenticeship Program, extend the current interim Australian Apprenticeship Incentive System program, increase the Disability Australian Apprentice Wage Support subsidy and increase the Living Away From Home Allowance.
Beer excise indexation
The Government will pause indexation on draught beer excise and excise equivalent customs duty rates for a 2-year period, from August 2025.
Alcohol producers: increase to remission cap and WET rebate cap
The Government will 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).
More funding for ASIC to deter illegal phoenixing
The Australian Securities and Investments Commission will receive $3.0m over 4 years from 2025-26. This aims to improve its data analytics capability to deter illegal phoenixing activities, particularly in the construction sector.
Australian Business Registers: further funding
The Government will provide $207m over 2 years from 2025-26 to continue the stabilisation of Australia's business registers and undertake targeted uplifts.
Foreign ownership of housing
The ATO will be provided $5.7 million over 4 years from 2025-26 to enforce the ban on foreign residents from purchasing established properties.
Reduction of HELP debts
The Government has promised to reduce Higher Education Loan Program (HELP) and other student debts for more than 3 million Australians by around $19bn. The measure will reduce outstanding student debts by 20% before indexation is applied on 1 June 2025 - subject to the passage of legislation - which will remove $16bn in debt.
Employment contract non-compete clauses to be abolished
The Government will ban non-compete clauses for more than 3m Australian workers in industries including childcare, construction and hairdressing. This aims to rectify the misuse of non-compete clauses, including minimum wage workers being sued by former employers.
Support for small business franchisees
The Australian Competition and Consumer Commission (ACCC) will receive $7.1m over 2 years from 2025-26 to strengthen regulatory oversight of the Franchising Code of Conduct and ensure a more transparent and effective regulatory framework for the franchising sector.
The 2025-26 Budget Papers are available from the following website:
Budget 2025-26 - https://budget.gov.au/
For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au
Source : Chartered Accountants ANZ