The Australian Federal Budget 2025-26 Highlights

On Tuesday, 25 March 2025, Treasurer Jim Chalmers presented the 2025–26 Australian Federal Budget, outlining significant updates to key economic forecasts. This budget impacts various sectors, including personal and business tax, banking, infrastructure, health, and climate change, shaping the Australian economy and its global standing.

Financial Services Industry

Key Measures

The Financial Services Council (FSC) noted that there were “no surprises” for the financial services industry. A key measure included is the clarification of tax arrangements for managed investment trusts, ensuring legitimate investors can continue to access concessional withholding tax rates. This amendment, effective from 13 March 2025, complements the Australian Taxation Office’s strengthened guidelines to prevent misuse.

Tax Integrity Program

Additionally, the budget allocates $50 million over three years to extend the Tax Integrity Program, enabling the ATO to ensure timely payment of superannuation liabilities by Australian businesses.

Superannuation

Revenue Windfall

Superannuation tax receipts have significantly contributed to a $9.4 billion upward revision in tax receipts over five years from 2024–25 to 2028–29, driven by stronger projected investment returns from super funds.

Payday Super Reform

The budget’s sole superannuation measure, detailed in the Women’s Budget document, is the payday super reform, set to begin on 1 July 2026, with $404.1 million allocated over four years to support the reform.

Future Made in Australia

Economic Transformation

The government’s “Future Made in Australia” agenda aims to drive economic transformation through cleaner, cheaper energy and job creation. The 2024–25 budget allocated $22.7 billion over a decade to support innovation, clean energy manufacturing, and investment. This includes funding for hydrogen, critical minerals, and clean energy technologies, alongside a $2 billion boost to the Clean Energy Finance Corporation.

Green Metals Production

The current budget allocates over $3 billion to support the production of Australian-made green metals such as aluminium and iron.

Tax Cuts

New Tax Cuts

A notable feature of the budget is the announcement of new tax cuts for every Australian taxpayer from 1 July 2026. These cuts are in addition to those legislated last year, which have been rolling out since 1 July 2024.

Tax Rate Reductions

The new tax cuts will reduce the 16 per cent rate to 15 per cent from 1 July 2026, and further to 14 per cent from 1 July 2027, decreasing receipts by $17.1 billion over five years.

Housing

Increased Commitments

Housing is a key focus, with Labor pledging to increase total housing commitments to $33 billion. This includes $1.5 billion through the Housing Support Program and $3 billion in incentive payments under the New Homes Bonus.

Help to Buy Scheme

The Help to Buy scheme is also expanded with an $800 million commitment, enabling around 40,000 Australians to purchase homes with lower deposits and smaller mortgages.

Foreign Buyers Ban

Additionally, foreign buyers will be banned from purchasing existing homes for two years from April 2025, with $5.7 million allocated to the ATO for enforcement and $8.9 million for an audit program targeting land banking by foreign buyers.

Responses

Economic Analysts

Krishna Bhimavarapu, APAC economist at State Street Global Advisors, described the budget as “surprisingly more than a plain vanilla offering,” highlighting the surprise tax cuts and the government’s focus on productivity, clean energy, housing, defence, and infrastructure spending.

Financial Services Council

Financial Services Council chief executive, Blake Briggs, praised the Treasurer for addressing cost-of-living challenges and providing stability for the financial services industry.

Super Members Council

However, the Super Members Council (SMC) criticized the government for not going far enough with superannuation reforms, particularly the outdated law affecting teen workers’ retirement savings.

Impact on Businesses

Contingency Reserve Allocation

The budget has set aside $40.8 billion in the contingency reserve for measures that are either confidential or yet to be announced before the election. This indicates that additional business support funding may be on the horizon.

R&D Strategic Examination

The ongoing federal Strategic Examination of R&D (SERD) suggests that any significant changes to innovation support will likely be postponed until the Review’s recommendations are released.

Future Made in Australia Initiative

The budget reaffirms the government’s commitment to a sustainable future through its “Future Made in Australia” initiative, focusing on mature industries like aluminium and iron ore. These investments, along with the creation of a new Front Door for investors with major transformational proposals, underscore the government’s aim to transition heavy industries to low carbon production and support private sector investment in value-adding resources, ensuring Australia remains competitive in global markets.

Food & Grocery Code of Conduct

The budget emphasizes strengthening the Food & Grocery Code of Conduct, developing a National Food Security Strategy, and continuing to support export and trade efforts in agricultural and regional communities.

Impact on Individuals

HELP and Student Loan Repayments

The government plans to reduce HELP or student loan debt by applying a one-off 20 percent reduction before indexation on 1 June 2025. Additionally, the minimum repayment threshold for HELP and student loan debts will increase from $54,435 in 2024-25 to $67,000 in 2025-26. HELP repayments will now be calculated only on the income above the new $67,000 threshold, rather than on total annual income.

Energy Bill Relief

The government will extend its energy bill relief measures, which were set to expire on 30 June 2025, for an additional two quarters. This will provide two more quarterly $75 energy bill rebates through to 31 December 2025.

Personal Income Tax Compliance Program

The government continues to address non-compliance by individual taxpayers, allocating $75.7 million over the next four years from 1 July 2025 to the Personal Income Tax Compliance Program. This program will focus on proactive, preventative, and corrective activities in key areas of non-compliance.

What Does It Mean for You?

• Increased Take-Home Pay: From 1 July 2026, there will be an increase in take-home pay due to a reduction in the 16 percent personal income tax rate.
• Reduction in HELP and Student Loan Balances: A 20 percent reduction in HELP and student loan balances, along with revised repayment thresholds and methodology.
• Cost of Living Relief: Households will benefit from two additional $75 quarterly energy bill rebates.

These measures aim to provide financial relief and support to both businesses and individuals, fostering economic stability and growth.

Access the following link for more information about the goals and priorities of the Federal Budget 2025-26: Budget.gov.au | Budget 2025–26