The 2025-26 Federal Budget was handed down by Treasurer the Hon. Dr Jim Chalmers MP on 25 March 2025. The budget focuses on cost-of-living relief, tax cuts, affordable healthcare, and housing support. Below are the key takeaways from this year’s budget announcement.
Tax cuts for individuals
Lower tax rates:
- From 1 July 2026 the 16% marginal tax rate (for income between $18,201 and $45,000) will drop to 15%.
- From 1 July 2027, it will be further reduced to 14%.
More take-home pay:
- The average wage earner is expected to be $536 better off per year.
- Combined with previous tax relief measures, Australians could see an increase of over $2,000 in disposable income.
Businesses left out:
- No major tax changes for businesses.
- The $20,000 instant asset write-off is not extended beyond 2025, which may impact small businesses.
Medicare levy threshold increase
To provide further cost-of-living relief, the government has raised the Medicare levy income threshold:
- Singles: Threshold increases from $26,000 to $27,222.
- Families: Threshold rises from $43,846 to $45,907.
- Single seniors and pensioners: Threshold moves from $41,089 to $43,020.
- Family threshold for seniors and pensioners: Increases from $57,198 to $59,886.
This means fewer Australians will have to pay the Medicare levy, reducing their tax burden.
Energy bill relief
With energy prices expected to rise by almost 9% in some states, the government has introduced direct rebates:
- Every household and 1 million small businesses will receive $150 in power bill rebates.
- Rebates will be applied automatically to electricity bills in the second half of 2025.
- The initiative will cost $1.8 billion and follows last year’s $300 energy credit, which expires on 30 June 2025.
Student debt reduction
A major win for Australians with student loans:
- 3 million Australians with student debt will see their loan balances reduced by 20%.
- The salary threshold for compulsory repayments will be increased.
- Repayment rates will be lowered, easing financial pressure on graduates.
Healthcare and Bulk Billing
The government is investing heavily in healthcare affordability:
Cheaper medicines:
- The maximum cost of PBS-listed medicines will drop from $31.60 to $25 per script from 1 January 2026.
- Pensioners will continue to pay a frozen rate of $7.70 per script.
Bulk-billing expansion:
- $8.5 billion investment in Medicare to increase bulk-billed GP visits.
- The goal: 9 out of 10 GP visits to be bulk billed by 2030
Housing and homeownership support
With housing affordability remaining a major issue, the government is taking new steps to help Australians buy homes:
Banning foreign buyers:
- Foreign investors will be banned from purchasing established homes in Australia for two years to free up the housing market for locals.
New home construction:
- More homes will be built using modern construction methods to speed up supply.
- Expansion of the Help to Buy scheme to assist first-home buyers.
Economic outlook
Despite a $42.1 billion budget deficit, the economy is expected to remain stable:
- GDP growth: Forecasted to remain above 2%.
- Unemployment rate: Expected to stay at 4%.
- Wages growth: Predicted to outpace inflation, boosting real incomes.
- Net migration: Forecasted to decline, easing pressure on infrastructure and housing.
Conclusion
The 2025-26 Federal Budget is centered around cost-of-living relief, tax cuts, and healthcare improvements while maintaining a strong economic outlook. The biggest winners are:
- Low- and middle-income earners (due to tax cuts).
- Households and small businesses (receiving energy rebates).
- Australians with student loans (20% debt reduction).
- Patients and pensioners (bulk billing and cheaper medicine).
However, businesses received little direct support, and the budget deficit of $42.1 billion raises concerns about long-term sustainability.
If you need expert guidance on how these budget changes affect you or your business, Regency Partners is here to help. Contact us today for tailored accounting and financial advice.
