Federal Budget 2025
The 2025 Federal Budget was handed down on 25 March. Here's what it says.
Income Tax Cuts
If Labor is re-elected, they will cut the tax rate on income earned between $18,201 and $45,000 from 16 per cent to 15 per cent from 1 July 2026, and will reduce it even further to 14 per cent from July 2027.
Anyone earning more than $45,000 per year will save $268 in the first year and $536 a year from year two onwards.
The opposition has announced they will not enact this measure if they’re elected.
| Thresholds | 2025 & 2026 income years | 2027 income year | 2028 income year |
|---|---|---|---|
| $0 - $18,200 | Tax-free | Tax-free | Tax-free |
| $18,201 - $45,000 | 16% | 15% | 14% |
| $45,001 - $135,000 | 30% | 30% | 30% |
| $135,001 - $190,000 | 37% | 37% | 37% |
| $190,001 | 45% | 45% | 45% |
Medicare Levy Low Income Threshold
The level at which people start to pay the Medicare Levy will be updated as follows for the 2025 income year.
| Category of taxpayer | 2025 | 2026 |
|---|---|---|
| Single individual | $27,222 | $26,000 |
| Families not eligible for the SAPTO | $45,907 | $43,846 |
| Single individual eligible for the SAPTO | $43,020 | $41,089 |
| Families eligible for the SAPTO | $59,886 | $57,198 |
Tax Practitioners Board
The government has included spending to strengthen sactions and modernise the registration framework for Tax Practitioners.
ATO Funding
The ATO will receive $999 million to extend two important tax compliance programs
- Shadow Economy Compliance Program; and
- Personal Income Tax Compliance Program
Cutting Student Loans
A one-off move to slash student debts by 20 per cent has been funded in the budget at a cost of $738 million over four years.
The income level at which loans will need to start being repaid will also increase from $54,435 in 2025 to $67,000 in 2026.
However, the debt relief is subject to legislation being passed that won't be introduced until after the federal election.
That also means it is contingent on a Labor election win.
The government says the measure would wipe $5,520 from the average higher-education loan.
This move is in addition to the rececnt reforms to the way student loans are indexed.
Power Bill Relief
The government will extend rebates on electricity bills by six months, providing another $150 cut to power bills for households and small businesses.
The rebates will be automatically applied to every household and about 1 million small businesses from July 1, and applied over two quarterly instalments.
Treasury estimates that cost-of-living relief will directly reduce headline inflation by about half a percentage point in 2025, and household bills by 7.5 per cent on average.
Expanded Help To Buy for First Home Owners
The Help to Buy scheme legislated last year will be expanded to allow more people to co-purchase a home with the federal government.
Single people earning up to $100,000 and couples earning up to $160,000 will be able to use the scheme to buy a home, with the government covering up to 40 per cent of the cost and taking a portion of the home's equity.
Owners can then buy out the government's stake over time.
The cap on eligible properties will also be lifted, with price limits dependent on the state and whether the property is in a capital city or elsewhere.
Restricting Foreign Ownership of Housing
Overseas citizens will be banned from buying existing houses in Australia for two years from next month.
On top of that, the government will spend $5.7 million to enforce the ban and another $8.9 million on an audit of land-banking by foreign buyers.
There are some exceptions to the ban for investments that significantly ramp up housing supply or support its availability.
The government committed to this measure to match an election promise made by the Coalition seeking to relieve some pressure on the housing market.
Switching Jobs
The government will ban non-compete clauses for workers earning less than $175,000, meaning they will be free to move to a competing business or start their own.
Non-compete clauses can suppress wages, the government says, and are being used across sectors including child care, construction and hairdressing.
The government has also vowed to close loopholes that allow business to fix wages and issue "no poach" agreements.
Update to Child Care
Three days of subsidised care will be made available to all families earning less than $533,000, replacing the existing "activity test" for those days of care.
It means parents will no longer have to work, study or be looking for work for at least 16 hours each fortnight to access childcare subsidies.
The measure was a Labor election commitment but was brought forward and passed through parliament last month. It will begin in January 2026.
Pharmaceutical Benefits Scheme
The government will fund a further reduction in the price of PBS-listed medications, cutting the cost of a script from $31.60 to $25 from the start of next year.
The price of a script for concession card holders will remain unchanged at $7.70.
Additionally, the government will spend just over half a billion dollars across five years to shore up the supplies of medicines under a pharmaceutical wholesalers agreement.
Haslam Consulting & Accounting acknowledges Traditional Owners of Country throughout Australia and recognises the continuing connection to lands, waters and communities.
We pay our respect to Aboriginal and Torres Strait Islander cultures; and to Elders past and present.