We take insight here of the mainly tax related changes in the Federal Budget 2025-26 announced on Tuesday this week, in relates to the topics of Individual & Families, Business & Employers, Government & regulators, & The Economy.
Individuals & Families
Modest Personal Income Tax Cuts
Effective Date: 1 July 2026
The government has announced a phased reduction in personal income tax rates. Taxpayers will see a decrease in rates starting from 1 July 2026, with another reduction from 1 July 2027.
- The tax rate for earnings between $18,201 and $45,000 will drop from 16% to 15% in 2026 and further decrease to 14% in 2027.
- The estimated cost of these reductions is $648 million over four years.
- Maximum annual savings per taxpayer:
- $268 in 2026-27
- $536 in 2027-28
Revised Personal Income Tax Brackets
| Income Brackets ($) | Rates in 2024–25 & 2025–26 (%) | Rates in 2026–27 (%) | Rates in 2027–28 (%) |
| 0 – 18,200 | Tax-free | Tax-free | Tax-free |
| 18,201 – 45,000 | 16 | 15 | 14 |
| 45,001 – 135,000 | 30 | 30 | 30 |
| 135,001 – 190,000 | 37 | 37 | 37 |
| >190,000 | 45 | 45 | 45 |
Increased Medicare Levy Thresholds for Low-Income Earners
Effective Date: 1 July 2024
The government has raised the income threshold for exemption from the Medicare levy, reducing costs for low-income earners.
| Category | 2024-25 Threshold ($) | 2025-26 Threshold ($) |
| Singles | 26,000 | 27,222 |
| Families | 43,846 | 45,907 |
| Single Seniors & Pensioners | 41,089 | 43,020 |
| Family Seniors & Pensioners | 57,198 | 59,886 |
| Additional Child/Student | 4,216 | 4,027 |
This measure is estimated to cost $648 million over five years.
$150 Energy Bill Relief
Effective Date: 1 July 2025
Eligible households and small businesses will receive a $150 automatic credit on their energy bills, disbursed in quarterly instalments between 1 July and 31 December 2025.
- Estimated cost: $1.8 billion over two years.
Changes to Foreign Resident Capital Gains Tax (CGT)
Effective Date: Delayed to 1 October 2025 (earliest)
Proposed amendments to foreign resident CGT rules, initially scheduled for 1 July 2025, have been delayed. These amendments will expand the assets subject to CGT for foreign residents and require them to report high-value transactions with a value of at least $20 million to the ATO before completion.
Temporary Ban on Foreign Ownership of Established Homes
Effective Date: 1 April 2025
A two-year ban will prevent foreign and temporary residents, along with foreign-owned companies, from purchasing established residential properties in an effort to combat ‘land banking.’
Changes to Managed Investment Trust (MIT) Taxation
Effective Date: Post-Royal Assent
The extension of the cleaning building Managed Investment Trust (MIT) withholding tax concession, initially scheduled for 1 July 2025, has been postponed. It will now commence on the first 1 January, 1 April, 1 July, or 1 October after the Act receives Royal Assent.
Additionally, the government will amend tax laws to clarify MIT arrangements, ensuring that legitimate investors continue to benefit from concessional withholding tax rates. These changes will apply to fund payments made from 13 March 2025 and align with the ATO’s increased scrutiny in this area to prevent potential misuse
‘Help to Buy’ Program Expansion
The government has expanded the ‘Help to Buy’ program, which reduces the upfront cost of purchasing a home by providing an equity contribution through Housing Australia. Under the program:
- Eligible participants can receive up to 30% of the purchase price for an existing home.
- For new homes, the Commonwealth equity contribution increases to 40%.
- The income eligibility thresholds have increased from $90,000 to $100,000 for singles and from $120,000 to $160,000 for joint applicants.
- Additional conditions apply, and the program remains unavailable for new applications at this time.
Business & Employers
Ban on Non-Compete Clauses for Workers
Effective Date: 2027
The government will prohibit non-compete clauses for employees earning below the high-income threshold ($175,000). Additional measures will:
- Prevent businesses from fixing wages through anti-competitive agreements.
- Ban ‘no-poach’ agreements restricting employee mobility.
Paused Beer Tax and Benefits for Alcohol Producers
Effective Date: August 2025 (beer excise) & 1 July 2026 (other measures)
- The indexation of draught beer excise duty will be paused for two years starting August 2025.
- The excise remission cap for brewers, distillers, and wine producers will rise to $400,000 annually from 1 July 2026 (up from $350,000).
Extension of Trade Tariffs on Russia & Belarus
The government has prolonged an additional 35% tariff on imports from Russia and Belarus as part of ongoing support for Ukraine.
Government & Regulators
$999M Boost to ATO Tax Compliance Efforts
Effective Date: 1 July 2025
Funding of nearly $1 billion over four years will expand key tax compliance programs, expected to recover $3.2 billion in revenue. Programs include:
- Tax Avoidance Taskforce
- Shadow Economy Compliance Program
- Personal Income Tax Compliance Program
- Tax Integrity Program (targeting medium and large businesses, as well as wealthy groups)
$700M Cut in Government Outsourcing
The government aims to reduce reliance on external contractors, estimating savings of $718 million by 2028-29.
The Economy
Growth
Australia’s economy is projected to grow at a modest pace, with GDP expected to expand by 2.25% in 2025-26 and 2.5% in 2026-27. The direct economic impact of Ex-Tropical Cyclone Alfred is estimated to reduce GDP by up to 0.25%.
Budget Deficit
The underlying cash balance is forecasted to be a deficit of -$42.1 billion in 2025-26, with gradual improvements over subsequent years, though remaining in deficit.
Government Debt
Debt is projected to increase from 18.4% of GDP in 2023-24 to 21.5% in 2025-26, reaching 23.1% by 2028-29.
Employment
The unemployment rate remains low, with strong workforce participation. Since May 2022, employment has increased by over one million people, with around 80% of new jobs created in the private sector. Unemployment is expected to peak at 4.25%.
Wages
Annual real wages have grown for five consecutive quarters and are projected to rise by 0.5% in 2024-25. The Wage Price Index (WPI) grew by 3.2% through the year to the December quarter 2024 and is forecast to grow by 3% to June 2025 and 3.25% to June 2026.
Inflation
Inflation is expected to be 2.5% through the year to the June quarter 2025. The decline in inflation has been supported by cost-of-living relief measures, a reduction in petrol prices towards the end of 2024, and rebates on electricity and rental assistance. These factors collectively reduced headline inflation by 0.75% through the year to December 2024.
Global Economic Tensions
Trade tensions continue to contribute to global uncertainty. The indirect impact of tariffs is estimated to be nearly four times greater than the direct effect on Australia, reflecting significant trade relationships with China and the United States. Any retaliatory tariffs would further amplify potential losses in real GDP.
Pitt Martin Group is a CPA accounting firm, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.
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This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.
By Angela Abejo @ Pitt Martin Tax
