Federal Budget 2025/26

The 2025 Federal Budget provides cost of living relief through tax cuts, lower power bills, reduced co-payment for medicines and other measures.

Note: These changes are proposals only and may or may not be made law (unless stated otherwise).

Cost of Living

Energy Relief

The Government will provide an energy bill rebates of $75 per quarter for eligible Australian households and small businesses until 31 December 2025 to provide cost-of-living relief. This measure extends the 2024–25 Budget measure titled Energy Bill Relief Fund – extension and expansion.

Capped cost of PBS medicines

The general co-payment for medicines under the Pharmaceutical Benefits Scheme (PBS) will be capped at $25 (currently $31.60) for individuals who are not concession card holders. Once the PBS Safety Net threshold is reached, the maximum co-payment reduces to $7.70 (until 1 January 2030).

Increased general practitioner (GP) bulk billing

Eligibility for bulk billing incentives will be expanded to all Australians from 1 November 2025. A new Bulk Billing Practice Incentive Program will be introduced for general practices if they bulk bill every visit under Medicare.

Reduced HELP and student loan repayments

The amount an individual can earn before they are required to start repaying their HELP and student loans (minimum repayment threshold) will increase and repayments will only be calculated on income above the minimum repayment threshold. The changes will apply to all HELP Student Loans, VET Student Loans, Australian Apprenticeship Support Loans, Student Start-up Loans and Student Financial Supplement Scheme.

New vs old repayment scheme

Individuals with HELP and student loans and repayment income above the minimum repayment threshold, but less than $180,000 will benefit by reduced compulsory repayments, resulting in more disposable income.

Reduced HECS/HELP debts by 20%

HECS/HELP debts will be reduced by 20%. The reduction will apply before the outstanding loan balance is indexed on 1 June 2025. A university graduate with the average debt of $27,600 would see approximately $5,520 deducted from their outstanding loan balance. The changes will apply to all HELP Student Loans, VET Student Loans, Australian Apprenticeship Support Loans, Student Start-up Loans and Student Financial Supplement Scheme.

Expanded ‘Help to Buy’ program

The Help to Buy program was established to assist eligible individuals with the purchase of a principal place of residence. Expected to commence later this year, the Commonwealth will provide an equity contribution up to 30% of the purchase price of an existing home and up to 40% of the purchase price of a new home. The income cap and property price caps used to determine eligibility will increase. For singles, the income cap will increase from $90,000 to $100,000. For joint applicants (and single parents), the income cap will increase from $120,000 to $160,000. The property price cap depends on the location of the property and details can be found in the Government’s media release.

Personal taxation

Personal income tax cuts

The lowest marginal tax rate of 16% will reduce to:

15% from 1 July 2026, and
14% from 1 July 2027.

The lowest marginal tax rate applies for taxable income between $18,201 and $45,000. There are no changes to the other marginal tax rates and thresholds. The table below summaries the tax schedules.

NOTE: Rates do not include Medicare levy or Medicare levy surcharge.

As a result of the changes, the tax savings are outlined in the table below

Increase in Medicare levy low-income thresholds

The Government will increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners retrospectively from 1 July 2024. This is a routine increase to the thresholds to ensure that low-income individuals continue to be exempt from paying the Medicare levy or pay a reduced levy rate. The thresholds are proposed to be increased as follows:

The family income thresholds will increase by $4,216 for each dependent child or student, up from $4,027.

Business Taxation

Small business instant asset write-off extension

The instant asset write-off threshold of $20,000 was previously proposed to be extended until 30 June 2025. If passed, small businesses with aggregated annual turnover below $10 million will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use by 30 June 2025. The threshold applies on a per asset basis. Assets valued at $20,000 or more can continue to be placed into a depreciation pool and depreciated at 15% in the first income year and 30% thereafter. 

This measure was not specifically mentioned in the 2025 Federal Budget paper however it was included in the supplementary Budget materials. This proposal was announced as part of the 2024 Federal Budget, however has not been passed. 

Social security

Guaranteed 3 days of early childhood education and care

Families will be eligible for at least 72 hours per fortnight (three days a week) of subsidised Early Childhood Education and Care (ECEC) without having to satisfy the Child Care Subsidy (CCS) activity requirements. Eligibility for subsidised care will continue to include a family income test limit ($533,280 in 2024/25).

Aged care

Aged care reform and funding pay increases for aged care nurses

The Government has announced additional funding to continue the delivery of aged care reforms and the implementation of recommendations from the Royal Commission into Aged Care Quality and Safety. The Government has also announced additional funding to increase the minimum award wages of registered and enrolled nurses employed in the aged care sector.

Superannuation

No new measures were announced for superannuation. Similar to previous years, additional funding will be provided to the ATO to focus on timely payment of superannuation payments, including from 1 July 2026 when Payday Super is proposed to commence. Payday super requires superannuation payments to be paid within a specified period (generally seven days) after an employee receives their pay.

No further announcements about Division 296 tax

The Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 containing the Division 296 tax measures passed the House of Representatives but is still before the Senate. The proposed method to calculate earnings and its effect of taxing unrealised capital gains have been controversial. Once the Federal Election is called, this Bill will lapse unless it is legislated beforehand. The Government has made no further announcement about Division 296 tax in tonight’s budget.

DISCLAIMER:

Sources: www.budget.gov.au

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