Last night, the 2025-2026 Federal Budget was handed down. Below are some of the highlights:

Taxation

Starting July 2026, the lowest marginal tax rate will be reduced to 15% (and 14% from July 2027) for income between $18,201 and $45,000.

Energy

$180bn to deliver a $150 energy bill rebate extension until the end of 2025.

Healthcare

$8.5bn on Medicare for increases to Medicare payments, 50 new urgent care clinics, and a bulk billed GP service.

$1.8bn over 5 years for cheaper medicines on the Pharmaceutical Benefits Scheme.

$240m for women’s health - reproductive health and menopause

Education

$500m to provide a 20% reduction in HECS-HELP debt for students, and a realignment of the repayment schedule to reduce the amount required to be paid, effective from 1 July 2025.

Housing

$800m to expand the ‘Help to Buy’ scheme, reducing the size of the deposit required to buy a home by co-buying with the Government.

Families

Three days of subsidised childcare for families with young children (income tested) from 1 January 2026 replacing the Child Care Subsidy activity test.

Lifestyle

From August, the excise on beer will be frozen for 2 years.

ATO Compliance

The Australian Taxation Office has been allocated almost $1bn in funding to extend and enhance its compliance programs.

Individuals & families

From 1 July 2026

The Government will provide a “modest” tax cut to all taxpayers from 1 July 2026 and again from 1 July 2027.

The tax rate for the $18,201-$45,000 tax bracket will reduce from its current rate of 16%, to 15% from 1 July 2026, then to 14% from 2027-28 at a cost of $648m over four years.

**The saving from the tax cut represents a maximum of $268 in the 2026-27 year and $536 from the 2027-28 year.**

Medicare levy thresholds increased for low-income earners

From 1 July 2024

The Medicare levy low-income threshold exempts low-income earners from having to pay the levy. As of 1 July 2024, the exemption threshold will increase.

The change will mean low-income earners will pay less when they lodge their income tax returns for 2024-25.

The threshold changes come at a cost of $648m over 5 years.

Cost of living

$150 energy bill relief

From 1 July 2025

Households and small business will receive an additional automatic credit of $150 on their energy bills in quarterly instalments between 1 July 2025 and 31 December 2025.

The extension of energy bill rebates is expected to cost $1.8 billion over a two-year period.

2 year ban on foreign ownership of established homes

From 1 April 2025, the Government has banned foreign and temporary residents, as well as foreign-owned companies, from purchasing established dwellings to prevent ‘land banking’. The ban applies for 2 years but is subject to some limited exceptions.

Student loans

A 20% reduction in the balance of all HELP Student Loans, VET Student Loans, Australian Apprenticeship Support Loans, Student Start-up Loans, and the Student Financial Supplement Scheme will take effect before the annual indexation on 1 June 2025. Additionally, the income threshold for compulsory loan repayments will increase from $54,435 to $67,000 in 2025/26. This means you won’t need to repay your loan until your income exceeds $67,000, and repayments will only be calculated on the income above this threshold. From 1 July 2025, the repayment schedule will be adjusted to reduce the amount you need to pay. For example, if you earn $80,000, your repayment will be based on the $13,000 above the threshold, resulting in a lower repayment of $1,950, compared to $2,800 under the current system.

‘Help to buy’ program extended

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.

Initially, to be eligible for the program, the income threshold for a single person was $90,000, and for joint participants, it was $120,000. The Budget increases this threshold to $100,000 and $160,000, respectively. Additional conditions apply.

The program is not currently available to applicants.

Business & employers

Non-compete clauses to be banned

From 2027

The Government has announced that it will ban non-compete clauses for low- and middle-income employees (under the Fair Work Act, the high-income threshold is currently $175,000). Non-compete clauses are conditions in employment contracts that prevent or restrict an employee from working for a competitor.

In April 2024, the Treasury released an issues paper for consultation on Worker non-compete clauses and other restraints. The review stated that, “The direct consequence of a non-compete clause is that it hinders competition among businesses: it disincentivises workers from leaving their current job, creating a barrier to the entry of new businesses and the expansion of existing businesses.”

The Government is also making changes to competition law to prevent businesses from:

Fixing wages by making anti‑competitive arrangements that cap workers’ pay and conditions, without the knowledge and agreement of affected workers.

Using ‘no‑poach’ agreements to block staff from being hired by competitors.

Beer tax paused and benefits for wine and alcohol producers

From

August 2025 (beer excise)

1 July 2026 (other measures)

Indexation on the draught beer excise and excise equivalent customs duty rates will be paused for two years from August 2025. This just means that the price of beer won’t go up because of tax.

Support is also provided under the Excise remission scheme for manufacturers of alcoholic beverages increasing caps for all eligible brewers, distillers and wine producers to $400,000 per financial year, from 1 July 2026 (up from $350,000).

Compliance

Almost $1bn to the ATO for tax compliance

From 1 July 2025

The Government has set aside $999m over 4 years for the ATO to expand its compliance programs:

Tax Avoidance Taskforce

Shadow Economy Compliance Program

Personal Income Tax Compliance Program

Tax Integrity Program (medium and large businesses and wealthy groups)

The compliance programs are expected to deliver a threefold return of $3.2bn.

We trust this information is a useful resource for you and your business. If you have any questions about the Budget, please email us at info@vatcpa.com.au or call on (03) 9584 2277.

It is important to note that some of the policies outlined in this publication are yet to be passed as legislation and therefore may be subject to change or further refinement. Any advice in this Federal Budget Analysis has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on any advice, consider whether it is appropriate to your objectives, financial situation and needs.