FEDERAL BUDGET UPDATE 2025
It's every accountant's favourite night of the year, where we swap MAFS drama with government drama... and this year's dinner party (AKA the 2025-26 Federal Budget) was always going to be an important one before the country's big commitment ceremony (AKA the Federal Election).
Ok, that's enough of the MAFS metaphors... but what is 'the budget'?
The Federal Budget is presented each year by the current government and it summarises the country's overall position. Think of it the same as your family budget - are we saving money (in a surplus) or are we spending so much that we need to put it on the credit card (in a deficit).
This year, the government has announced that we will be in a deficit of -$42.1 bn (eeek) in 2025-26 before improving the following year, but still remaining in the red.
Why does this matter for you?
The budget has big implications for the health of the overall economy and whilst a deficit isn't in and of itself a bad thing, it can lead to issues if the country's debt gets to an unstainable level. It is also a good annual summary of where your taxes go. There's only so much Government income, so this income needs to be allocated to health, housing, domestic violence support, defence etc. etc.
But really, most people just want to know 'what did I get'? So here we go:
Tax Cuts For All!
Every body who pays tax, will receive a tax cut!
The tax cuts announced are set to take effect from 1 July 2026 and 1 July 2027 - reducing the current $18,201 - $45,000 tax bracket from 16% currently to 15% from 1 July 2026 & 14% from 1 July 2027. Even those earning above $45k will still receive the benefits of these cuts.
Obviously we are going to get excited about the prospect of tax cuts, but don't go out and buy that new TV just yet... The maximum benefit for an individual is only $268 in the 2026-27 year and $536 in the 2027-28. So your new TV budget may be restricted to Kogan...
New Tax Rates
Medicare Levy
The Medicare levy low-income threshold will increase and be backdated from 1 July 2024.The change will mean low-income earners will pay less when they lodge their income tax returns for 2024-25 and ongoing.
New Medicare Levy Thresholds
Energy Bill Relief
Households and small business will all receive an additional automatic credit of $150 on their energy bills in quarterly instalments between 1 July 2025 and 31 December 2025.
In the same manner previous credits have been applied, no action is required, this will just automatically show on your energy bills for the period.
Housing
The Government’s ‘Help to Buy’ program reduces the deposit required to buy a home by providing an equity contribution. Under the program, Housing Australia provides eligible participants with a Commonwealth equity contribution of up to 30% of the purchase price of an existing home and up to 40% of the purchase price of a new home. That is, they will give you the money and take a stake in your home (think bank of Mum & Dad except it's Daddy Albo giving you the money).
Originally, to be eligible for the program, the income threshold for a single was $90,000 and, for joint participants, $120,000. The Budget increases this threshold to $100,000 and $160,000 respectively (with other conditions and caveats).
In total, an extra $1bn has been added to housing, bringing the total commitment to $33bn, with the goal to build an additional $1.2m new homes before 2030. Over the coming years, there will be an increased focus on prefab housing to speed up construction.
Also from 1 April 2025, foreign and temporary residents of Australia (including foreign owned companies) will be banned from purchasing established dwellings for 2 years.
Tradies & Apprentices
Apprentices working in construction fields (e.g. carpentry, joinery, bricklayers etc.) will be given $10k of incentives for completing their training.
Some other apprentices in priority occupations related to housing may also be eligible for similar incentives up to $5k
Renters
The new 'A Better Deal for Renters' plan will see the Government working with State Governments to push for better renter protections, with a focus on unfair evictions and rental increases.
Employers & Employees
From 2027, the Government will completely ban non-compete clauses for low & middle-income employees (which is any employee earning less than $175k).
Non‑compete clauses are conditions in employment contracts that prevent or restrict an employee from moving to a competitor. So this will give employees more leverage and mobility when looking to change employment.
Note that a non-compete agreement is different from a non-solicitation agreement among other common contract clauses, so if this ban becomes law, it may be worth discussing your employment contracts with a HR professional to ensure you remain compliant.
Beer!
Indexation on the beer excise will be paused for two years from August 2025. This just means that the price of beer won’t go up because of tax. Cheers to that!
Almost $1bn to the ATO for Tax Compliance
The Government has set aside almost $1bn over 4 years for the ATO to expand it's compliance programs.
Long story short, now is not the time to get on the ATO's bad side...
Finally, this budget was presented by the current Labor government, meaning if they lose the election, some of the above may not be implemented by the Coalition as they will have their own policies and spending priorities.
As an example, Peter Dutton and Angus Taylor of the coalition have already said they won't support the tax cuts, however they will announce the Coalition plan in their budget response (which may include an even larger tax cut.