What the 2025-26 Federal Budget means for you

The 2025-26 Federal Budget has been delivered. The Labor government say the budget is built around five main priorities: easing the cost of living, strengthening Medicare, increasing housing supply, investing in education at all levels, and making the economy more productive and resilient.

This year’s budget was limited and light on detail; unsurprisingly given it was delivered on the eve of a looming election.

As is always the case, Budget measures need to pass through the legislative process before they become law and may change during that process; a particularly important point in an election year and when the Opposition are currently opposing the proposed changes.

Many clients will likely welcome the proposed tax cuts, which were the centrepiece of this year’s Budget. From 1 July 2026, the Government proposes to reduce the 16 per cent tax rate to 15 per cent (for income between $18,201 and $45,000). From 1 July 2027, this tax rate will be reduced further to 14 per cent. Each 1% tax cut for this bracket equates to $268 per annum.

The other items of most relevance for our self-funded retirees, professional families and successful business owners include:

Self-Funded Retirees

The Government confirmed its proposal to increase the Medicare levy low-income thresholds from 1 July 2024. A number of clients will also welcome the proposed extension of energy rebates up until 31 December 2025 ($150 for all households and $150 for small businesses), cheaper medicines (with a reduction in the PBS  maximum co-payment from $31.60 to $25.00 per script, the freezing of scripts at $7.70 for concession card holders and an expansion of what the PBS covers) and greater access to bulk billing.

Beyond this, it was more about what was not announced. The Transfer Balance Cap (TBC) cap increase will still take effect from 1 July 2025. This means an increase of $100,000 to $2,000,000. There was no mention about the Government’s planned intentions to reduce the tax concessions available to individuals with a Total Superannuation Balance (TSB) above $3 million. If the Bill does not pass before announcement of the Federal Election, it will lapse. Notwithstanding, it appears the Government is still committed to this change and will be taking it to the next election.

Furthermore, you may wish to share some other Government proposals with your children and/or grandchildren. You can read more about this and other announcements under the “professional families” heading.

Professional Families

The Government confirmed its focus on education. It proposed investment in schools (putting every public school on a path to full funding), expanding access to early education where every child is eligible for at least 3 days per week of subsidised early education and care (subject to certain income eligibility criteria) and where child care is simple, affordable and accessible for every family.

Beyond this, it was more about what was not announced. Employer Superannuation Guarantee (SG) contributions will increase by 0.5% to 12% from 1 July 2025. This marks the final tranche of the 0.5% yearly increase from 1 July 2021 (when it was 9.5%) to 1 July 2025.  You can read more about these and other announcements under “self-funded retirees” and “successful business owners” as these will measures will also impact professional families either now or in the future.

Furthermore, you may wish to share with your children and/or grandchildren that the Government plans; 1. a raft of measures to enforce the ban on foreign home ownership (aiding housing affordability for younger Australians), 2. to cut Higher Education Loan Program (HELP) and other student loan debts by 20% from 1 June 2025 (so growth in debt does not outpace wages growth), 3. Reform university funding and 4. to offer 100,000 Free TAFE places every year from 1 January 2027.

Successful Business Owners

The Government will ban non‑compete clauses for low‑ and middle‑income workers; potentially seen as a negative for some of our successful business owners and a positive for some of our professional families.

Beyond this, it was more about what was not announced. The Government has not proposed to extend the $20,000 instant asset write-off by a further 12 months so this will cease 30 June 2025.

Many of the proposed changes outlined under “self-funded retirees” and “professional families” will also impact successful business owners either now or in the future.

Concluding thoughts

Overall, the proposals are limited for self-funded retirees, professional families and successful businesses. However as indicated earlier, most will require the passage of relevant legislation through Parliament and may change during that process.

This information has been prepared and issued by ITL Financial Planning and is current as at 26 March 2025. Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. The information in this document regarding taxation and legislative change is based on policy announcements which are yet to be passed as legislation and may be subject to future change.  This information contains material provided directly by third parties). It is given in good faith and has been derived from sources believed to be accurate at its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. ITL Financial Planning does not accept responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. 

Written by Shereen Churchill (Financial Adviser)