Will you really be in the money after the recent announcements made in the Federal Budget?
Modest income tax cuts were the headline in the recent budget announcement, along with plenty of cash allocated to key areas of voter interest – healthcare, education, housing, energy, and families.
But, will you really be better off?
Let’s take a quick look at the plans for 2025-26 and explore the areas of interest for you.
Personal Income Tax Cuts
The big talk of the Budget was the two-stage personal income tax cuts coming into effect. As of 1 July 2026, your bank account will be a little better off!
On 1 July 2026, the tax rate for the $18,201-$45,000 tax bracket will reduce from the current rate of 16% to 15%. This will create a saving for you and put up to $268 back in your pocket. Then, from 1 July 2027, the rate will be cut to 14%, resulting in a tax cut of up to $536.
Modest is certainly the key word to use when describing these cuts, with whispers that this Budget has been all about voter appeal. This sentiment feels appropriate when you consider the other announcements made.
There is one more tax win we should mention. The threshold for the Medicare levy exemption has increased from 1 July 2024, meaning lower income earners will pay less for Medicare when lodging their 2024-25 tax returns.
Investment In Australia
The Budget also announced more than $7 billion being allocated to additional spending measures in 2025-26, with a further $20 billion forecasted over 5 years.
Here are the key initiatives they intend to spend on:
Energy
The energy rebate has been extended until the end of 2025. That means you’ll receive an automatic $150 credit on your energy bill in quarterly installments from 1 July 2025. This will come at a cost of $1.8 billion over two years.
Healthcare
Healthcare received a few important boosts:
- $8.5 billion allocated to increased Medicare payments, 50 new urgent care clinics and a bulk-billed GP service.
- The Pharmaceutical Benefits Scheme is due a $1.8 billion injection over 5 years to create cheaper medicines.
- Women’s health also received an important nod with $240 million allocated to reproductive health and menopause.
Education
From 1 July 2025, there will be $500 million available to provide a 20% cut to HECS-HELP debt for students. The repayment schedule will also be realigned to reduce the amount required to pay.
Housing
The Help to Buy program has also been extended with new income parameters. This is an initiative that reduces the deposit required to buy a home by ‘co-buying’ with the Government. Eligible participants can gain a 30% equity contribution on an existing home and a 40% contribution on a new home.
The Government has also announced they are introducing a two-year ban on foreign and temporary residents, and foreign-owned companies from buying established dwellings. This move is designed to prevent ‘land banking’ and make more homes available for everyday Australians.
Families
If you meet the income testing requirements, you could receive three days of subsidised childcare for your young children from 1 January 2026 onwards.
Measures On Pause
There are two previously announced measures in this Budget that remain on the cards despite not being passed by Parliament yet. They are:
- An impending tax on Super balances above $3 million remains in place for 1 July 2025. This includes a 30% tax on future earnings for Super balances above $3 million.
- An instant $20,000 asset write-off for small businesses that was meant to apply to the 2024-25 financial year.
Because neither of these initiatives has been passed by Parliament yet, they will lapse if not passed prior to the election being called.
Tax Compliance Funding
While we aren’t too sure what this will look like yet, the Government has allocated almost $1 billion over 4 years for the ATO to expand its tax compliance programs. This will very likely mean that the ATO will continue to focus on enforcing tax compliance and penalising those who are not in line with its measures.
There has also been additional funding of $27.4 million provided to the Tax Practitioners Board to target ‘high risk practitioners’ who are known to have a poor history of compliance with tax returns or don’t comply with personal tax allocations.
These measures highlight the importance of ensuring your tax returns are correct and using a reputable expert for all your accounting needs. The team here at Cadenze are always on hand to provide helpful and practical advice on tax if you need a tax expert you can trust, or if you have any concerns about your current provider.
The Economy
The economic outlook is still not amazing. Australia’s economy is expected to grow in both 2025-26 and 2026-27. However, the word modest is popping up again with only a 2.5% increase forecasted for the next two years.
The Budget is back in deficit at -$42.1 billion in 2025-26. While it has improved, it will remain in the red for several years. Debt is up, but the unemployment rate has stayed low, expected to peak at 4.25%.
Due to the work done to relieve cost of living pressures in 2024, inflation is expected to remain at 2.5% throughout the year to the June 2025 quarter. But trade tensions have magnified global uncertainty in a time when global growth is already subdued – retaliatory tariffs could amplify GDP losses.
What Does It All Mean?
The Budget will impact Australians in different ways, depending on their individual circumstances. The best thing to do is to have a chat with us about how it could affect you and if you need to take any immediate action.
Get in touch with the Cadenze team now as we are happy to provide support and advice on any areas of your finances.