On Tuesday, 25 March 2025, Treasurer Jim Chalmers delivered his 4th Federal Budget, outlining the Government’s financial plans for 2025-26.
With the Federal election looming, the Budget, predictably, did not contain any significant tax reform measures. The focus of this most recent Budget was providing assistance with the increasing cost of living, with limited housing availability and cost of education and childcare being targeted areas.
The following is a summary of the key business, personal and superannuation reforms.
BUSINESS MEASURES
ATO Compliance Funding
In what has become a predictable feature of recent budgets, the ATO will receive yet another substantial funding boost to enforce taxpayer compliance. This expanded funding will support several key programs:
- Tax Avoidance Taskforce;
- Shadow Economy Compliance Program;
- Personal Income Tax Compliance Program; and
- Tax Integrity Program.
Tax Practitioners
The Tax Practitioners Board (TPB) is set to receive additional funding and enhanced powers to target high-risk practitioners from 1 July 2025. This includes strengthened sanctions and a modernised registration framework.
The TPB has been instructed to “support the sustainability of the tax profession by increasing the ease of re-entry for tax and BAS agents who take career breaks.” The government will consult on implementation details with the profession.
Managed Investment Trust changes confirmed
The Budget confirms the previously announced “clarification” of tax arrangements for managed investment trusts (MITs). Foreign-based widely-held investors, such as pension funds, will maintain access to concessional withholding tax rates on eligible distributions through MITs.
These amendments will apply to fund payments from 13 March 2025.
Additionally, start dates have been deferred for:
- the clean building MIT withholding tax concession; and
- strengthening the foreign resident capital gains tax regime.
Instant asset write-off
While not explicitly mentioned in the budget papers, the government appears to be proceeding with the extension of the instant asset write-off for 2024-25. This measure allows small businesses with aggregated turnover under $10 million to:
- deduct the full cost of eligible assets under $20,000 (first used or installed between 1 July 2024 and 30 June 2025);
- deduct cost additions under $20,000 for previously written-off assets; and
- write off small business pool balances under $20,000 at year-end.
The Opposition has proposed expanding this to businesses with turnover under $50 million and increasing the threshold to $30,000. The Opposition Leader’s Budget Reply Speech on Thursday night may provide more details on this alternative approach.
Support for apprentices and training
The budget has allocated funding over 4 years to increase support for apprentices, including:
- reframing the New Energy Apprenticeships Program as the Key Apprenticeship Program;
- extending the Australian Apprenticeship Incentive System program;
- increasing the Disability Australian Apprentice Wage Support subsidy; and
- raising the Living Away from Home Allowance.
Additionally, Free TAFE will become a permanent program from 1 January 2027, funding at least 100,000 places annually with priority for those facing barriers to education and employment.
Relief for alcohol producers
Good news for brewers, distillers and wine producers:
- draught beer excise indexation will be frozen for 2 years from August 2025; and
- the excise remission cap and Wine Equalisation Tax producer rebate cap will increase from $350,000 to $400,000 per financial year from 1 July 2026.
Tackling Illegal Phoenixing
The Government is strengthening efforts to combat illegal phoenixing, particularly in the construction sector, with:
- additional funding for ASIC to improve data analytics for targeted enforcement;
- funding to stabilise Australia’s business registers;
- linking Director Identification Numbers (DINs) to the Company Register.
These measures aim to improve information quality for investors and creditors while deterring fraudulent phoenix activity.
Employment contract reforms
In a significant workplace relations change, non-compete clauses will be banned for workers earning less than the high-income threshold (currently $175,000), affecting over 3 million Australians. The Government will also close loopholes in competition law that currently allow:
- wage-fixing through anti-competitive arrangements; and
- “no-poach” agreements between businesses.
These reforms will take effect from 2027, giving businesses time to adjust.
Support for Franchisees
Small business franchisees will benefit from additional funding for the ACCC to strengthen oversight of the Franchising Code of Conduct, aiming to create a more transparent and effective regulatory framework.
Foreign Property Investment Restrictions
The ATO will receive funding to enforce the ban on foreign residents purchasing established properties, which takes effect from 1 April 2025. The Government will also implement an audit program targeting land banking by foreign investors.
PERSONAL MEASURES
Personal tax rates cut from 1 July 2026 and 2027
The Government has proposed to cut the personal income tax rate for the income threshold ($18,200 – $45,000) from 16% to 15% (from 1 July 2026) and 14% (from 1 July 2027).
Under the proposed changes, every Australian taxpayer will receive a tax cut of up to $268 from 1 July 2026, rising to $536 from 1 July 2027.
The Government said the proposed tax cuts will provide “modest but meaningful” cost-of-living relief and “return bracket creep” by lowering average tax rates for all taxpayers, especially for low- and middle-income earners.
The Government’s proposal to reduce the resident income tax rates is not expected to flow through and impact the income tax rates for foreign residents. This is because foreign residents are not entitled to the tax-free threshold or the first income tax threshold.
No changes were made to the low-income tax offset (LITO) in the 2025-26 Budget. The maximum amount of the LITO is $700. The maximum LITO reduces at a rate of 5 cents per dollar for taxable income above $37,500 and reduces at a rate of 1.5 cents per dollar for taxable income above $45,000 and is not payable for taxable income of $66,667 or more.
Medicare levy low-income thresholds for 2024-25
For the 2024-25 income year, the Medicare levy low-income threshold for singles has been increased to $27,222 for 2024-25 (up from $26,000 for 2023-24). For couples with no children, the family income threshold is $45,907 (up from $43,846 for 2023-24). The additional amount of threshold for each dependent child or student is $4,216 (up from $4,027).
For single seniors and pensioners eligible for the SAPTO, the Medicare levy low-income threshold is $43,020 (up from $41,089). The family threshold for seniors and pensioners is $59,886 (up from $57,198), plus $4,216 for each dependent child or student.
The increased thresholds will apply to the 2024-25 and later income years. Note that legislation is required to amend the thresholds.
Energy bill rebate to be extended: extra $150 for 2025
The Government will extend its energy bill rebate until the end of 2025 by providing a further 2 instalments of $75 for households and small businesses.
From 1 July 2025, Mr Albanese said households and around one million small businesses will see another $150 in rebates “automatically applied to their electricity bills in quarterly instalments, on top of the previous rebates already being rolled out”.
Help To Buy home scheme expanded
The Government will increase its equity investment in the Help to Buy scheme to $6.3bn (up $800m), and increase the income and price caps.
Under this shared equity loan scheme, the Commonwealth will provide an equity contribution up to 40% of the purchase price to assist up to 40,000 eligible first home buyers to purchase a new or existing home.
The Government said it will increase the scheme’s income cap from $90,000 to $100,000 for individuals, and from $120,000 to $160,000 for joint applicants and single parents.
The property price caps for eligible homes will also be increased and linked with the average house price in each State and Territory, not dwelling price, so first home buyers have more choice.
Commonwealth legislation to establish the Help to Buy program was enacted on 10 December 2024 but the scheme will not commence until the Program Directions are in force. The Help to Buy scheme will be open for applications later in 2025, following registration of the Program Directions, passage of State legislation, and implementation by Housing Australia.
Early childhood education: child care subsidy
The Government will provide $4.5m over 4 years from 2025-26 to Services Australia to make system changes to ensure consistency with the passing of recent legislation to implement the Child Care Subsidy Three Day Guarantee. According to the Government, this will ensure families are entitled to at least 3 days a week of subsidised early childhood education and care.
The Child Care Subsidy Three Day Guarantee will replace the Child Care Subsidy activity test from January 2026.
Foreign ownership of housing: ATO to enforce ban
The Government has already announced the ban on foreign persons (including temporary residents and foreign-owned companies) from purchasing established dwellings for 2 years from 1 April 2025, unless an exception applies. Exceptions to the ban will include investments that significantly increase housing supply or support the availability of housing on a commercial scale, and purchases by foreign-owned companies to provide housing for workers in certain circumstances.
The land banking measures are designed to ensure “foreign investors comply with requirements to put vacant land to use for residential and commercial developments within reasonable timeframes”. Land banking refers to the practice of entities purchasing land and holding it until such time as its value has increased and then selling, i.e. with no development or use of the land.
Reduction of HELP debts
The Government has confirmed that it will make changes that will reduce Higher Education Loan Program (HELP) and other student debts for more than 3 million Australians by around $19bn. The measure will reduce outstanding student debts by 20% before indexation is applied on 1 June 2025 – subject to the passage of legislation – which will remove $16bn in debt.
The Government has also confirmed it will reform the repayment system for the HELP and other student loan schemes. The reform will deliver a fairer student loan repayment system that is based on marginal rates and will increase the amount individuals can earn before they are required to start repaying their loan. It will take effect from 1 July 2025, subject to the passage of legislation.
The Government has already legislated a cap on HELP indexation based on the lower of the Consumer Price Index or the Wage Price Index. The change was backdated to 1 June 2023, and has already reduced outstanding student debt by around $3bn, according to the Government.
SUPER RELATED MEASURES
The only super item of note was some additional funding to extend an ATO Tax Integrity Program which is expected to raise an extra $31m in unpaid superannuation from medium and large businesses and wealthy groups over 5 years from 2024-25.
Proposed Div 296 regime – uncertainty remains
While no new major super measures were announced in the Budget, the super industry has enough on its plate at the moment in terms of navigating the uncertainty surrounding the proposed Div 296 regime for superannuation account balances above $3m from 1 July 2025.
Under proposed Div 296 of the ITAA 1997, individuals with an adjusted total superannuation balance over $3m at 30 June each year will be subject to an additional 15% tax on a percentage of earnings equal to the percentage of superannuation balances that exceeds $3m (not indexed) for an income year. The Div 296 tax will apply from 2025-26 and will be in addition to any tax their super funds pay on earnings in accumulation. As a result, earnings attributable to balances above $3m will generally attract a combined headline rate of 30%.
Proposed Div 296 of the ITAA 1997 is legislation that has not yet been passed by Parliament. This legislation will lapse once the Prime Minister calls the Federal election, unless the Bills are passed beforehand. Therefore, the status of the proposed Div 296 regime may be subject to the outcome of the May election, if not passed before the calling of the election.
If the ALP is returned to Government at the May election, it is likely that the Bills would be re-introduced, although the proposed 1 July 2025 start date may be delayed.
Super Guarantee: no change to legislated rate rise to 12% for 2025-26
The Budget did not announce any change to the timing of the next (and final) Super Guarantee (SG) rate increase. The SG rate is currently legislated to increase from 11.5% to 12% on 1 July 2025. It has been gradually increasing by 0.5% each year since it was 9.5% in 2020-21. The 12% rate from 1 July 2025 marks its final destination rate.
SG for high-income earners
The increase in the SG rate to 12% from 1 July 2025 also means that the SG opt-out income threshold will decrease to $250,000 from 1 July 2025 (down from $260,870). High-income earners with multiple employers can opt-out of receiving SG from an employer to avoid unintentionally breaching the concessional contributions cap ($30,000 for 2024-25 and 2025-26).
Payday Super
Payday Super reforms have been previously announced to commence from 1 July 2026. The reforms will amend the superannuation guarantee (SG) legislation to align the payment of SG contributions with the day on which an employee is paid (rather than the current quarterly minimum payment schedule). The Government released draft legislation for these reforms on 14 March 2025, but no further changes were announced in this Federal Budget.
Important: This is not advice. Clients should not act solely on the basis of the material contained in this Bulletin. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. The Bulletin is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.
