2025/26 Federal Budget
Balancing the Books: Key Takeaways from the 2025 Federal Budget
Written by Shara Cox & Daniel Dubois
In the face of global economic challenges, Australia is experiencing a strong recovery with rebounding growth, moderating inflation, low unemployment, and rising real wages. The Government has achieved the first consecutive budget surpluses in nearly two decades, significantly reducing the deficit and lowering debt to ease interest costs. This Budget focuses on responsible economic management, continuing to tackle inflation, and delivering cost-of-living relief. For our clients, we expect these measures create a stable financial environment, offering opportunities to plan, invest, and grow with confidence. Many will also appreciate a cheaper beer!
Taxation
Cost of Living Relief and Tax Cuts
From 1 July 2026, the 16% Income Tax Rate (on income between $18,201 and $45,000) will be reduced to 15%. From 1 July 2027, this tax rate will be further reduced to 14%.
A worker earning an average salary, will get a Tax Cut of $268 in 2026–27 and $536 per year from 2027–28.
The Government is raising the Medicare Levy low-income threshold by 4.7% from 1 July 2024 for singles from $26K to $27,222, and for families from $43,846 to $45,907. Over one million low-income Australians will either be exempt from paying the Medicare levy or pay a reduced rate.
Energy Bill relief is provided by two $75 rebates for every household and around one million small businesses, directly applied to electricity bills through to December 31, 2025
A ban on non-compete clauses for low- and middle-income workers will boost wages and job mobility. There is also investment to support wage increases for aged care and early childhood education workers, including up to a 15% pay rise by December 2025.
Starting January 2026, the Government will reduce the Pharmaceutical Benefits Scheme (PBS) co-payment from $31.60 to $25.00 per script for general patients, with pensioner co-payments frozen at $7.70. Additionally, $1.8 billion is being invested to list new medicines, including treatments for endometriosis, lymphoma, menopause and major depression, on the PBS.
The Government is reducing all outstanding HELP and student debts by 20%, removing $16 billion from the accounts of 3 million Australians. It is also increasing the repayment threshold from $54,435 in 2024–25 to $67,000 in 2025–26, ensuring fairer compulsory repayments.
Delayed implementation of previously announced measures
The instant asset write-off has not been extended, with consequences for small business for the 2025 year given measures previously announced will not have time to be passed by parliament
It had been previously announced that ATO interest would not be deductible from 1 July 2025. This also has not been enacted – watch this space after the election.
The foreign resident capital gains tax regime has had its start date delayed from 1 July 2025 to a date after royal assent
No clarification has been provided in respect to changes in the interpretation of Division 7A or corporate residency
The Wider economy
Initiatives
The Australian Competition and Consumer Commission (ACCC) will be funded by the Government to address deceptive practices and enforcing the mandatory Food and Grocery Code of Conduct with penalties for breaches. It is also investing in planning reforms and reducing costs of essential products in remote First Nations communities to support families, farmers, and food security.
The Government is addressing excessive debit card surcharges and plans to introduce bans to ensure fairer costs at checkouts. It will work with state governments to tackle unfair trading practices and empower regulators to enforce consumer guarantees. Additionally, $6.7 million is allocated to extend the National Anti-Scam Centre, continuing efforts that have already reduced scam losses by over $1 billion since 2022.
Health
The Government is investing a record $7.9 billion to expand bulk billing, allowing an additional 15 million Australians to access free GP visits from November 2025. By 2030, 9 out of 10 GP visits are expected to be bulk billed, supported by incentives for practices to fully adopt bulk billing.
50 new Medicare Urgent Care Clinics will expand access to free urgent care, totalling 137 clinics nationwide. Public hospital funding will increase to $33.9 billion in 2025–26 to reduce waiting times and ambulance ramping. Additional investments will boost the healthcare workforce, adding 400 GP training places annually by 2028 and providing 400 nursing and midwifery scholarships.
A $792.9 million package will improve healthcare accessibility and affordability for women, including larger Medicare rebates for services like contraceptive procedures and menopause health assessments. It provides funding for oral contraceptives on the PBS, menopause hormone therapies, and expanded endometriosis clinics. The initiative also includes trials to simplify access to key treatments and new training programs for healthcare professionals.
Housing
The National Housing Accord aims to deliver 1.2 million new homes over 5 years, with nearly 45,000 completed in its first quarter and a focus on accelerating housing supply through reforms and investments. Around 55,000 social and affordable homes will be supported by the Housing Australia Future Fund and related initiatives. A $1.5 billion Housing Support Program will fund critical infrastructure and social housing projects, while $3 billion in incentives will address infrastructure backlogs. The Government is also promoting modern construction methods with $174 million in funding to speed up homebuilding.
The expanded Help to Buy program will allocate $800 million to assist 40,000 households with lower deposits, smaller mortgages, and up to 40% government equity contributions for homeownership.
From April 1, 2025, the Government will ban foreign buyers from purchasing established homes for two years and allocate $14.6 million to address enforcement and land banking issues.
The Government is investing $9.3 billion to improve housing and homelessness services, including doubling funding for homelessness support and allocating $1 billion for crisis and transitional accommodation for vulnerable groups.
Commonwealth Rent Assistance has increased by 45%, alongside strengthened renters' rights, including limiting rent increases to once a year and improving eviction protections. Refined Build to Rent tax concessions will support 80,000 new rental homes over the next decade, including 8,000 affordable homes, while offering stable 5-year tenancies to enhance security for renters.
From July 2025, apprentices in housing construction can receive up to $10,000 in incentives, while employers may qualify for up to $5,000 under extended Priority Hiring Incentive settings. These measures aim to address workforce shortages and support the construction of 1.2 million homes over the next five years
Education
A $5 billion investment in early childhood education includes $3.6 billion to raise wages for 200,000 educators and $1 billion for 160 new or expanded services in underserved areas. The $426.6 million 3 Day Guarantee ensures every child access to at least 3 days of subsidised care weekly, benefiting 100,000 families
The Better and Fairer Schools Agreement includes reforms like mandatory phonics and numeracy checks in early years to identify students needing extra support, alongside evidence-based teaching practices. It also focuses on providing more mental health support and intensive individualised assistance for students. An investment of $407.5 million is committed over four years from 2025–26, with an additional $7.2 billion planned for 2029–2036 under signed agreements.
Starting in January 2027, the Government has plans to permanently provide 100,000 Free TAFE places annually, depending on legislative approval.
Click here to read more about the Federal Budget on The Australian Government website.
As always, if you have any questions regarding the budget, please reach out to our friendly & helpful team at Salt.