2025/26 Federal Budget

Overview

On 25 March 2025, the Labor Government handed down the 2025/26 Federal Budget. To a large extent, it was a very quiet Budget, although there were unexpected tax cuts announced. Beyond this, it really didn’t contain anything by way of a surprise, not only because of the ongoing cost of living pressures many Australians are facing into, but also because this was a pre-election Budget. In fact, this Budget week is the last time both Houses of Federal Parliament are scheduled to sit before the election must be called.

Like last year, the 2025/26 Federal Budget has a focus on the cost of living issues facing many Australians.

The 2025/26 Federal Budget may provide a few opportunities to consider. Following is a summary of some of the major proposals.

Taxation

• The Government has announced changes to the personal income tax rates that will take effect from 1 July 2026 and again from 1 July 2027. The changes are a reduction in the marginal tax rate that applies to taxable income between $18,201 and $45,000, with the current rate of 16% reducing to 15% from 1 July 2026, and then to 14% from 1 July 2027.
  
  The following table shows the annual tax saving in 2025/26, 2026/27 and 2027/28 (compared to 2024/25) for selected levels of taxable income.

• Previously announced by the Government in November 2024, changes will be made to reduce the amount of HECS/HELP debt that students (and former students) have outstanding and the rate of repayment. This will include a 20% reduction in the outstanding level of debt on 1 June 2025, and an increase in the income thresholds before repayments will be required.
  
  
• Small business taxpayers should be aware that current ability to write off the cost of an asset valued under $20,000 will cease as of 30 June 2025 as this measure was not extended like it had been in previous Budgets.

Superannuation

Superannuation was untouched in this year’s Federal Budget. However, it is important to be aware of previous announcements that have not yet been implemented, but are arguably still on the table as part of the Government’s superannuation policy into the future. These include the following measures:

• The Government did not make any announcements around its intention to reduce the superannuation tax concessions available to individuals with a total superannuation balance (TSB) above $3 million. This measure, more commonly known as the Division 296 tax, will impose an additional 15% tax on earnings (including unrealised gains) that relate to the proportion of an individual’s superannuation balance that is greater than $3 million, covering amounts that are in either the accumulation or retirement phase. Balances below the proposed $3 million threshold will continue to be taxed at 15% for benefits held in the accumulation phase or 0% if held in a retirement phase pension account.
  
  These proposed changes are still in the Senate and may not pass before the election. If it is not passed and Labour win the election, we understand these changes will need to go through the House of Representatives again, starting from scratch (this may mean changes to what is currently proposed). The Liberals have previously suggested they would repeal this legislation if it got passed. If they win the election, we may never see Division 296.

• Under indexation in existing legislation, the general transfer balance cap will index from $1.9 million to $2.0 million from 1 July 2025. The changes to the general transfer balance cap may allow current or future retirees to convert more of their superannuation balances to a retirement income stream.
  
  
• In line with the indexation of the general transfer balance cap, the total super balance threshold will also index from 1 July 2025 from $1.9 million to $2 million. This threshold is relevant for determining whether a person can make non-concessional contributions to super, and also whether they are able to utilise the bring forward provisions.
  
  
• Under indexation in existing legislation, there will be no indexation to the contribution caps from 1 July 2025. The concessional contribution cap will remain at $30,000 and the non-concessional cap at $120,000. However, based on current movements in AWOTE, it is expected that these caps will increase to $32,500 and $130,000 respectively from 1 July 2026.
  
  
• The superannuation guarantee rate, currently 11.5%, will increase to the maximum set under legislation of 12% on 1 July 2025. With no indexation of contribution caps this 1 July, care should be taken to review any salary sacrifice or other regular contribution strategies to ensure an increase in super guarantee payments from employers does not cause an unintentional breach of contribution caps in the new financial year.
  
  
• Originally announced by the previous Coalition Government in the 2021/22 Federal Budget, legislation has now been implemented to provide individuals the ability to exit specific legacy retirement income products until December 2029.
  
  
• The current Government also previously committed to relax residency requirements for self managed super funds (SMSFs) and small APRA-regulated funds (SAFs) by extending the central management and control temporary absence period for members of SMSFs from the current two years up to five years, and removing the active member test. Whilst there has been no announcement to abandon this measure by the current Government, there has also been no additional announcement of it proceeding.
  
  
• Previously announced in the 2023/24 Federal Budget, from 1 July 2026 employers will be required to pay their employees’ superannuation guarantee entitlements at the same time they pay their salary and wages. This change should enable employees to have greater visibility over whether their entitlements have been paid, and will enable the ATO to recover unpaid super more easily.

Aged care

Other than additional funding arrangements there were no additional announcements for aged care in this year’s Federal Budget. However, it is important to be aware that reforms have already been made that will be effective from 1 July 2025, which may impact the amount required to be paid when accessing aged care services.

Clients, family and friends of Strategy First were recently invited to join our free Aged Care Seminar.

Event Details
Location: Dee Why RSL (932 Pittwater Rd, Dee Why NSW 2099)
Time: 10:00am - 11:00am
Date: Friday the 4^th April 2025

This space is complex, time consuming and emotional. We are able to provide advice in this area, as well as partnering with ‘Care & Living’ with Mercer who have been providing families with tremendous support, guidance and advice with respect to the non-financial side of things.

What’s clear is that planning early is so important. What better time to start the conversation than joining us at the Seminar or booking in for a ‘General Advice’ meeting with our Aged Care specialist, Erin Coyle. 

Please ensure to RSVP via the button below.

Other measures

• The Government will provide households and eligible small businesses a further six-month extension on rebates against their energy bills through to the end of 2025. All households, and around one million small businesses, will be eligible to receive an additional $150 rebate over this period. Rebates will be applied automatically against energy bills, and in instalments of $75 per quarter. This will include those on the Commonwealth Seniors Health Card.
• Initially announced on 25 February 2025, the Government will provide greater incentives to medical practices to bulk bill the cost for all patient visits from 1 November 2025, through the provision of increased additional rebates. The aim of this measure is to incentivise more practices to bulk bill Medicare for all patients that visit, which would then eliminate the need for patients at these practices to fund any gap payments.
• The Government will expand its Help to Buy scheme, aimed at assisting Australians to purchase their first home. Under the scheme, the Government provides up to a 40 per cent equity contribution to support eligible homebuyers purchase a home with a lower deposit and a smaller mortgage. Changes announced will lift the income cap for both singles and joint applicants looking buy a home.

It is always important to remember that at this point, most Budget night announcements are only statements of intended change and are not yet law. There may be others that impact on your personal situation, as well as other opportunities available from changes made in prior years. A financial adviser can help outline what these measures may mean for you, and the opportunities available now, or in the future.

This document has been prepared by BT, a part of Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian Credit Licence 233714 (Westpac) and information is current as at 26 March 2025. 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 does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. You should obtain and consider the relevant Product Disclosure Statement or other disclosure document, before making any decision about a product including whether to acquire or to continue to hold it.

This document may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, the Westpac accepts no responsibility for the accuracy or completeness of, nor does it endorse any such third party material. To the maximum extent permitted by law, we intend by this notice to exclude liability for this third party material. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. This document provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. 

Contributions have been made to this article by Strategy First Financial Planning Pty Ltd