Everything you need to know about the pre-election 2025-2026 Federal Budget

On Tuesday, 25 March 2025, Treasurer Jim Chalmers presented this year’s Federal Budget, which focused squarely on easing cost-of-living pressures and boosting the long-term resilience of the Australian economy.

With many households still feeling the financial squeeze, the 2025–26 Budget delivers a suite of practical measures designed to provide immediate relief, improve access to essential services, and invest in housing, healthcare, and education.

So what does it all mean for everyday Australians? 

INCOME TAX

The government has announced additional income tax cuts for all Australian taxpayers, set to take effect next year and continue into the following year.

• From 1 July 2026, the 16% tax rate, which applies to taxable income between $18,201 and $45,000, will be reduced to 15%

  
  

• From 1 July 2027, this tax rate will be reduced further to 14%.

The government estimates this will return up to $268 to taxpayers in the first year and up to $536 annually from the second year onward.

INCREASE IN THE MEDICARE LEVY FOR LOW INCOME THREASHOLD:

The government will raise the Medicare levy low-income thresholds by 4.7% for singles, families, seniors, and pensioners. As a result, over one million low-income Australians will remain exempt from the Medicare levy or continue to pay a reduced rate.

COST OF LIVING RELIEF

Electricity bills

The government will extend electricity bill rebates for six months, delivering an additional $150 reduction for households and small businesses.

From July 1, the rebates will be automatically applied to all households and approximately one million small businesses, spread across two quarterly instalments.

Student Debt-Holder

The budget includes a one-time 20% reduction in student debt, costing $738 million over four years.

However, the relief hinges on legislation that won’t be introduced until after the federal election, making it dependent on a Labor victory.

If implemented, the measure would cut an average of $5,520 from outstanding higher-education loans.

FIRST HOME BUYERS

The Help to Buy scheme, introduced last year, is being expanded to make homeownership more accessible by allowing more people to co-purchase 

a property with the federal government.

Under the revised scheme, single buyers earning up to $100,000 and couples earning up to $160,000 can access government support, with the government covering up to 40% of the property's cost in exchange for an equivalent share of equity. Homeowners will have the option to gradually buy out the government's stake over time.

Additionally, the price cap on eligible properties will be raised, with limits varying by state and location, including distinctions between capital cities and regional areas.

CHILDCARE

All families earning under $533,000 will soon have access to three days of subsidised childcare, regardless of their work or study status. 

This change removes the existing "activity test" for those days, meaning parents will no longer need to work, study, or job-seek for at least 16 hours per fortnight to qualify for subsidies.

Originally a Labor election commitment, the measure was fast-tracked and passed through parliament last month. It is set to take effect in January 2026.

REMOVAL OF THE INSTANT ASSET WRITE-OFF

The 2025 federal budget delivers a major surprise by ending the $20,000 instant asset write-off after June 30. 

Unless new legislation is passed by June 30, 2026, the threshold will drop to its legislated minimum of $1,000 next financial year, with standard depreciation rules applying to higher-value assets.

WHAT WASN'T IN THE BUDGET

• The government's proposed Division 296 'super tax,' which would double the tax rate on earnings for super fund balances exceeding $3 million from 15 per cent to 30 per cent, has failed to pass the Senate in its final sitting.
  

• Previously shelved policies, such as limiting negative gearing and reducing the general 50% Capital Gains Tax discount.

As your dedicated financial partners, we're available to address any questions you may have regarding the recent announcements. Please don't hesitate to reach out for any assistance or guidance you might require.

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