2025 Federal Budget Summary

The 2025/26 Federal Budget was handed down on Tuesday 25 March by the Treasurer Jim Chalmers. This Budget precedes what is expected to be a tightly contested election, with the Opposition set to respond later in the week.

As expected, the 2025/26 Federal Budget has a strong emphasis on easing the cost of living pressures, addressing housing affordability and well as strengthening Medicare.

To that end, the Government notably announced new personal income tax cuts and an extension of the energy bill relief for all Australian households and certain small businesses.

The key Federal Budget proposals include:

• Indexation of the Superannuation general transfer balance cap - From 1 July 2025, the general transfer balance cap (TBC) for Superannuation Funds increases from $1.9 million to $2 million in line with changes in the Consumer Price Index (CPI).

• Personal Income Tax – New Tax Cuts - All taxpayers will receive modest tax cuts starting from 1 July 2026. The 16% tax rate on taxable income between $18,201 and $45,000 will reduce to:
  • 15% from 1 July 2026, and
  • 14% from 1 July 2027.

There will be no changes to the other marginal tax rates and thresholds.

• Increased Medicare levy low-income thresholds - The Government will increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from 1 July 2024 to provide cost-of-living relief. The increase to these thresholds ensures that low-income individuals continue to be exempt from paying the Medicare levy or pay a reduced levy rate.

• Power Bill relief - As a relief measure for all eligible households and small businesses to help with the rise in energy costs, the Government has proposed to extend the existing energy bill rebate for another six months until 31 December 2025. Eligible households and around 1 million small businesses will each receive $150 from 1 July 2025 ($75 per quarter).

• Small Business Support – The $20,000 instant asset write-off threshold for the 2024/25 income year has been legislated. However, from 1 July 2025, it would appear that this threshold will revert to the legislated threshold of $1,000 for the first time in almost 10 years. 
• While no extension was announced in this year’s Budget, the possibility remains that the Government – or the Opposition – may revisit this threshold ahead of the next Federal election.

• Social Security Deeming Rates – Deeming rates have been frozen since 1 July 2022 and were intended to be applicable for two years until 30 June 2024. This was extended for another year in last year’s Federal Budget with historically low deeming rates continuing to be frozen until 30 June 2025.

While the Budget is silent on the issue of deeming, recent media reports indicate that the Government will seek to hold deeming rates at their current levels beyond 1 July 2025.

• Reduction of Student Debt - Student loans will be reduced by 20% before the annual indexation is applied on 1 June 2025. 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.

• Aged Care Reforms and Home Care - The Government will also provide an additional $2.5 billion over five years from 2024/25 (and an additional $6.1 billion from 2029/30 to 2034/35) to meet the cost of the Fair Work Commission’s decision for aged care nurses with funding to other aged care programs including residential aged care, the Home Care Packages program and the Support at Home program.

Please review the following Budget summary outlining the Federal Budget proposals. Note these are only proposals and the Budget announcements still need to be passed by both the House of Representatives and the Senate before they become law.

2025 Federal Budget Summary