2025/26 Federal Budget
Personal income tax measures
-New tax cuts for individual taxpayers in 2027 and 2028
The Government will deliver new tax cuts to individual taxpayers commencing from 1 July 2026 (i.e., from the 2027 income year). Under the new tax cuts, it is proposed that:
-The (current) 16% tax rate will be reduced to 15% from 1 July 2026; and
-The 15% tax rate will be further reduced to 14% from 1 July 2027.
By way of example, a taxpayer earning between $18,201 and $45,000 will get a tax cut of up to $268 in the 2027 income year and up to $536 from the 2028 income year.
-Increased Medicare levy low-income thresholds
The Government will increase the Medicare levy low-income threshold amounts and phase-in ranges for single individuals, families and seniors and pensioners that apply from 1 July 2024 to provide cost-of-living relief.
The increase to the thresholds ensures that low-income individuals continue to be exempt from paying the Medicare levy or pay a reduced levy rate.
Tax Practitioner Regulation and Compliance
The Government will strengthen the sanctions available to the Tax Practitioner Board (TPB), to modernise the registration framework for tax practitioners and provide funding to the TPB to undertake additional compliance targeting high-risk tax practitioners over four years from 1 July 2025. This measure will protect taxpayers from tax agent misconduct, including poor and unlawful tax advice, and maintain community confidence in the integrity of the tax system. It will also support the sustainability of the tax profession by increasing the ease of re-entry for tax and business activity statement agents who take career breaks.
Other tax-related budget measures
-Strengthening tax integrity
The Government will provide $999 million over four years to the ATO to extend and expand tax compliance activities.
-Managed investment trusts
The Government will amend the tax laws to clarify arrangements for managed investment trusts. This will ensure legitimate investors can continue to access concessional withholding tax rates in Australia, complementing the ATO’s strengthened guidelines to prevent misuse. This measure will apply to fund payments from 13 March 2025.
-Foreign resident capital gains tax regime
The Government will defer the start dates of the 2024/25 Budget measure, Strengthening the foreign resident capital gains tax regime, which will:
-Clarify and broaden the types of assets on which foreign residents are subject to CGT;
-Amend the point-in-time principal asset test to a 365-day testing period; and
-Require foreign residents disposing of shares and other membership interests exceeding $20 million in value to notify the ATO, prior to the transaction being executed.
Non-tax related budget measures of interest
-Making student loans fairer
As previously announced by the Prime Minister on 3 November 2024, the Government will reduce all outstanding Higher Education Loan Program (‘HELP’) and other student debts by 20%, subject to the passage of legislation. The 20% reduction is in addition to the recent indexation reforms. The Government is also increasing the amount that people can earn before they are required to start paying back their loans, from $54,435 in the 2025 income year to $67,000 in the 2026 income year.
-Energy bill relief
The Government is extending energy bill relief by providing eligible households and small businesses with two $75 bill rebates directly off their electricity bills until 31 December 2025 to provide cost-of-living relief.
-Expansion to Help to Buy scheme for first home buyers
Under the Help to Buy scheme, the Government will provide an equity contribution of up to 40% to support eligible home buyers to purchase a home with a lower deposit and a smaller mortgage. The Government will boost the scheme by increasing income caps from $90,000 to $100,000 for individuals and from $120,000 to $160,000 for joint applicants and single parents. Property price caps will also be increased and linked with the average house price in each state and territory, rather than dwelling price.
-Restricting Foreign Ownership of Housing
The Government will take action to ensure foreign investment in housing supports the Government’s broader agenda to boost Australia’s housing supply in the following ways.
-National Anti-Scam Centre"
The Government will provide $6.7 million in the 2026 income year to extend the operation of the National Anti-Scam Centre within the Australian Competition and Consumer Commission (‘ACCC’) to continue protecting consumers and businesses from scam activity.
-Small Business and Franchisee Support and Protection
The Government will provide $12 million over four years from the 2026 income year to support and protect small businesses
-Support for Hospitality Sector and Alcohol Producers
The Government will increase support for hospitality venues, brewers, distillers and wine producers through changes to the alcohol tax settings in Australia. The Government will pause indexation on draught beer excise and excise equivalent customs duty rates for a two-year period, from August 2025. Currently, all eligible brewers and distillers can receive an excise remission under the Remission Scheme up to a cap of $350,000. All eligible wine producers can currently receive a WET rebate up to a cap of $350,000 under the Producer rebate. This measure will increase the caps for all eligible brewers, distillers and wine producers to $400,000 per financial year, from 1 July 2026.
-Banning non-compete clauses for low and middle income workers
The Government will ban non-compete clauses that apply to workers earning less than the high income threshold in the Fair Work Act (currently $175,000). The Government will also close loopholes in competition law that currently allow businesses to:
-Fix wages by making anti-competitive arrangements that cap workers’ pay and conditions, without the knowledge and agreement of affected workers; and
-Use ‘no-poach’ agreements to block staff from being hired by competitors