Our Budget Report outlines this year’s Federal Budget 2025/ 2026 key economic forecast indicators and key tax and economic measures as announced by the Government on 25th March 2025.
Insights, analysis & key takeaways.
Australian Federal Budget at a Glance
On 25 March 2025, Treasurer Dr. Jim Chalmers delivered the 2025-26 Federal Budget. As the Government’s final Budget before the anticipated federal election, the measures are framed around five key priorities: targeted cost of living relief, housing supply, education, and continued investment in essential services.
Against a backdrop of moderating inflation, a resilient labour market, and subdued global growth, the Budget outlines an underlying cash deficit of $42.1 billion for 2025-26, or 1.5 percent of GDP. This follows an estimated deficit of $27.6 billion in 2024-25. Public debt is projected to increase to $1.022 trillion in 2025-26, with gross debt expected to peak at 37.0 percent of GDP in 2029-30 before gradually declining over the longer term.
Real GDP growth is forecast to lift from 1.5 percent in 2024-25 to 2.25 percent in 2025-26. Inflation is expected to return to within the Reserve Bank’s 2 to 3 percent target band by mid-2025, earlier than previously forecast, while the unemployment rate is projected to peak at 4.25 percent.
The Budget confirms the next stage of personal income tax cuts, with the 16 percent marginal rate on income between $18,201 and $45,000 reducing to 15 percent from 1 July 2026, and to 14 percent from 1 July 2027. Additional cost of living support includes the extension of energy bill rebates through to the end of 2025 and increases to the Medicare levy low-income thresholds.
No changes have been announced to the taxation of superannuation or to small business income tax settings. However, the Government has deferred the start date of a number of previously announced but unenacted tax measures, pending passage of enabling legislation.
Revenue measures include continued funding for tax compliance and integrity programs, enforcement of a proposed ban on foreign individuals purchasing existing residential property, and changes to the HELP repayment system alongside a one-off 20 percent reduction in outstanding HELP debts.
Total tax receipts are forecast at $676.1 billion in 2025-26 (23.5 percent of GDP), increasing to $778.3 billion by 2028-29. Upward revisions to personal income tax and superannuation fund tax receipts since the Mid-Year Economic and Fiscal Outlook (MYEFO) have contributed to stronger revenue projections, particularly in the near term.
| 2023-24 $b / % | 2024-25 $b / % | 2025-26 $b / % | 2026-27 $b / % | 2027-28 $b / % | 2028-29 $b / % | |
| Underlying cash balance | $16.8 | $-27.6 | $-42.1 | $-35.7 | $-37.2 | $-36.9 |
| Real GDP Growth | 1.4 | 1.5 | 2.25 | 2.5 | 2.75 | 2.75 |
| Employment Growth | 2.2 | 2.75 | 1 | 1.25 | 1.5 | 1.5 |
| Unemployment | 4.0 | 4.25 | 4.25 | 4.25 | 4.25 | 4.25 |
| CPI | 3.8 | 2.5 | 3 | 2.5 | 2.5 | 2.5 |
| Wage Price Index | 4.1 | 3 | 3.25 | 3.25 | 3.5 | 3.75 |
| Nominal GDP | 4.1 | 4.25 | 3.25 | 4 | 5.25 | 5.5 |
| Gross Debt | 906.9 | 940.0 | 1,022.0 | 1,092.0 | 1,161.0 | 1,223.0 |
Source: ABS Australian National Accounts: National Income, Expenditure and Product; Labour Force, Australia; Wage Price Index, Australia; Consumer Price Index, Australia; and Treasury
Andersen in Australia Comment:
In a budget which arguably we almost may not have had due to election timing, the Government has delivered a pre-election budget that is largely free from any significant measures of reform and is focused on cost of living relief and other measures to assist taxpayers with rising costs.
Whilst the Budget does contain personal income tax cuts proposed for all taxpayers from 1 July 2026, in totality there are limited substantive taxation changes proposed.
The Budget does contain the continuation of measures to extend and expand the Australian Taxation Office (ATO) tax compliance activities, including:
– Extending the Tax Avoidance Taskforce focused on compliance of multinationals and large taxpayers
– Expanding the Shadow Economy Compliance Program focused on under-reporting and non-compliant businesses
– Extending the Personal Income Tax Compliance Program focused on non-compliance
– Extending the Tax Integrity Program regarding timely payment of tax and superannuation
There is a distinct lack of any significant support for business, be it large businesses or small businesses, aside from a few specific measures:
– A two-year freeze on the beer excise for brewers and some limited additional support in relation to WET
– $20 million to promote Australian-made products via a “Buy Australian Made” campaign
– $2 billion for Australian-made metals, including green aluminium, and $1 billion for green steel production
– Incentives for construction apprentices and a new national licensing scheme for electricians
Corporate & International Measures
Amendments to Existing Arrangements for Managed Investment Trust Measures
The Government will amend the tax laws to clarify arrangements for managed investment trusts(MITs), ensuring legitimate investors can continue to access concessional withholding tax rates in Australia. This complements the Australian Taxation Office’s strengthened guidelines to prevent misuse. This measure will apply to fund payments from 13 March 2025.
The extension of the clean building managed investment trust withholding tax concession will be deferred from 1 July 2025 to the first 1 January, 1 April, 1 July, or 1
Deferral of Previously Announced Measure – Foreign Resident Capital Gains Tax Regime
The start date of this measure will be deferred from 1 July 2025 to the later of 1 October 2025 or the first 1 January, 1 April, 1 July, or 1 October after the amending Act receives Royal Assent.
Andersen in Australia Comment:
There are limited announcements in the corporate and global space in the Budget. However, it is worth noting that the Government’s forecasted receipts include net receipts of $468.9 million over the next four years, where decisions have been taken by the Government but not yet announced and not available for publication at this juncture (Budget Paper No. 1 – Table 1: Receipt measures since the 2024-25 MYEFO). This could mean there are new measures that are forecasted to contribute to the Government’s coffers in the immediate future. It is worth keeping an eye on this development.
Small To Medium Enterprises
Supporting the Hospitality Sector and Alcohol Producers
The Government proposes to pause indexation on draught beer excise and excise-equivalent customs duty rates for a two-year period, commencing in August 2025. Under this measure, the biannual indexation of draught beer excise and excise-equivalent customs duty rates, scheduled for August 2025, February 2026, August 2026, and February 2027, will not occur. Biannual indexation will recommence in August 2027.
The Government will also enhance support available under the existing Excise Remission Scheme for manufacturers of alcoholic beverages (the Remission Scheme) and the Wine Equalisation Tax (WET) producer rebate (Producer Rebate).
Currently, eligible brewers and distillers can receive an excise remission under the Remission Scheme up to a cap of $350,000. Similarly, all eligible wine producers can receive a WET rebate of up to $350,000 under the Producer Rebate.
This Budget measure will increase the caps for all eligible brewers, distillers, and wine producers to $400,000 per financial year, beginning 1 July 2026.
Abolition of Non-Compete Clauses in Employment Contracts
The Government proposes to introduce a ban on non-compete clauses for workers in specific industries, including childcare, construction, and hairdressing. This measure is based on the Treasury’s Competition Review. The ban will apply only to workers earning below the high-income threshold under the Fair Work Act, which is currently set at $175,000.
Additionally, the Government will seek to close competition law loopholes that currently enable businesses to:
• Fix wages through anti-competitive arrangements that cap workers’ pay and conditions; and
• Use ‘no-poach’ agreements to prevent staff from being hired by competitors.
The Government will consult on policy details, including potential exemptions, penalties, and any transitional arrangements. The proposed reform is expected to take effect from 2027 and will apply prospectively.
Andersen in Australia Comment:
While the pause on draught beer excise indexation and the increase in WET rebate caps were announced pre-Budget, these measures will provide welcome relief for small and medium enterprises in the sector.
We support initiatives aimed at increasing productivity and addressing competition barriers. However, the practical implementation of the proposed ban on non-compete clauses remains a key area for consideration. Through the consultation process, it will be essential to ensure appropriate safeguards are in place to mitigate intellectual property risks.
Global Mobility & Migration
Net Overseas Migration
Net overseas migration (NOM) is declining from its peak in 2022–23, reflecting lower migrant arrivals. NOM is expected to ease further over the forward estimates:
• Arrivals will continue to decline in 2024–25 before stabilising in 2025–26.
• Departures are projected to increase as post-pandemic visa holders approach the end of their stay.
Boosting Australia’s Economic Ties with India
The Government will allocate $20 million over four years from 2025–26 to enhance economic engagement with India.
• $16 million will be used to establish an Australia-India Trade and Investment Accelerator Fund, aimed at reducing technical and regulatory barriers to trade.
• The remaining funds will support collaboration between Australian and Indian cultural, educational, research, and business communities.
Restricting Foreign Ownership of Housing
As previously announced, the government has imposed a ban for foreign individuals (including temporary residents and foreign owned companies) from purchasing established dwellings for two years from 1 April 2025, unless an exception applies. Exceptions to the ban will include investments that significantly increase housing supply or support the availability of housing on a commercial scale, and purchases by foreign‑owned companies to provide housing for workers in certain circumstances.
The Australian Taxation Office (ATO) will be allocated $5.7 million over four years from 2025–26 to enforce the ban. Additionally, $8.9 million will be allocated over four years from 2025–26, with an ongoing allocation of $1.9 million per year from 2029–30, to support the ATO and Treasury in implementing an audit program and strengthening compliance efforts to address land banking by foreign investors.
By limiting purchase from foreign buyers for existing properties, the government will be able to ease pressure on house prices and make homeownership more accessible for Australians.
The enhanced compliance approach to target land banking practice will ensure foreign investors purchasing land to develop it for housing or commercial use within reasonable timeframes.
Andersen in Australia Comment:
This year’s Budget contains no substantial new announcements related to global mobility and no new migration measures to address Australia’s talent shortages.
While the Government’s investment in strengthening economic ties with India is a positive step, greater support is needed to help Australian businesses attract global talent and address ongoing skill shortages.
As for the measure to restrict foreign ownership of housing, this reflects the Government’s commitment to addressing housing affordability and ensuring that the Australian housing market remains accessible to its residents.
ATO compliance measures
Strengthening Tax Integrity
The Budget includes measures to extend and expand the Australian Taxation Office’s (ATO) tax compliance activities, including:
• $717.8 million over four years to extend the Tax Avoidance Taskforce, focusing on compliance of multinationals and large taxpayers.
• $155.5 million over four years to expand the Shadow Economy Compliance Program, targeting under-reporting and non-compliant businesses.
• $75.7 million over four years to extend the Personal Income Tax Compliance Program, addressing non-compliance.
• $50 million over three years from 2026 to extend the Tax Integrity Program concerning timely payment of tax and superannuation.
Tax Practitioners Board (TPB): Additional Funding and Sanctions to Target High-Risk Practitioners
The Government aims to strengthen the sanctions available to the TPB, modernise the registration framework for tax practitioners, and provide additional funding to enable the TPB to undertake increased compliance operations targeting high-risk tax practitioners over four years from 1 July 2025.
The Government will consult on the implementation details of this measure.
Andersen in Australia Comment:
It is noteworthy that the majority of the Budget’s allocation for strengthening tax integrity measures is directed towards the Tax Avoidance Taskforce, which focuses on multinationals and large businesses. This emphasis contrasts with the ATO’s recent guidance on tax gaps within the Australian taxation landscape, which identified significant shortfall gaps among small and medium enterprises. Additionally, this measure is estimated to increase tax receipts by $3.2 billion over five years.
The expansion of the TPB’s sanctions and registration framework reflects the Government’s response to the recommendations from the 2019 Independent Review of the Tax Practitioners Board, following recent issues involving PwC. We await further details and consultation on the practical implementation of these measures.
Individual & Superannuation
Proposed Reduction in Personal Tax Rates
The Government has proposed reductions to personal income tax rates for resident taxpayers in Australia. These tax cuts will take effect from July 1, 2026, and will be implemented in two stages:
• From July 1, 2026: The 16% tax rate for income between $18,201 and $45,000 will be reduced to 15%.
• From July 1, 2027: The 15% tax rate will be further reduced to 14%.
For individuals earning above $45,000, these changes will result in additional tax relief of up to $268 in the 2026–27 financial year and up to $536 annually from 2027–28.
The proposed tax rate changes for 2026–27 and 2027–28 are summarised here:
| Taxable Income | Tax Rate (2024-2025 and 2025-2026) | Tax Rate (2026-2027) | Tax Rate (2027-2028) |
| $0 – $18,200 | 0% | 0% | 0% |
| $18,201 – $45,000 | 16% | 15% | 14% |
| $45,001 – $135,000 | 30% | 30% | 30% |
| $135,00 – $190,000 | 37% | 37% | 37% |
| $190,001 and over | 45% | 45% | 45% |
The tax rates for foreign residents and working holiday makers remain unchanged.
Foreign resident tax rates for 2025/2026 (unchanged from 2024-25):
| Taxable Income | Tax Rate |
| $0 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| $190,001 and over | 45% |
Working holiday maker tax rates (holders of subclass 417 or 462 visas, unchanged from 2024-25):
| Taxable Income | Tax Rate |
| $0 – $45,000 | 15% |
| $45,001 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| $190,001 and over | 45% |
There have been no announced changes to the Low Income Tax Offset (LITO). The existing structure of the LITO provides a maximum offset of $700 for individuals with taxable income up to $37,500. This offset gradually reduces for income up to $66,667.
Increase in Low-Income Medicare Levy Thresholds
As part of the Government’s plan to support low-income earners, the low-income Medicare levy thresholds will increase from the 2024–25 financial year.
| Category | 2024-25 Low-income Threshold | 2024-25 Full Medicare levy (2%) applies aboveRate |
| Singles | $27,222 | $34,027 |
| Single Seniors & Pensioners | $43,020 | $53,775 |
| Families (not Seniors & Pensioners) | $45,907 (plus $4,216 for each dependent child) | $57,383 (plus $5,270 for each dependent child) |
| Families (Senior and Pensioner) | $59,886 (plus $4,216 for each dependent child) | $74,857 (plus $5,270 for each dependent child) |
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.
Reduction of HELP debts
In the Budget papers, the Government has further detailed its commitment to providing relief and reforming the Higher Education Loan Program (HELP) and other student loan schemes.
As previously announced in the Mid-Year Economic and Fiscal Outlook (MYEFO) review, the Government has proposed to reducing HELP and other student loan debts by 20 per cent before indexation is applied on 1 June 2025, subject to legislation.
If passed, this measure would provide a significant relief, removing $16 billion in student loan debt.
The Government has also committed to allocate $182.2 million over four years from 2024–25 (and $402.3 million from 2028–29 to 2034–35) to reform the Student Loan Repayment System for the HELP and other student loan schemes. The reform will deliver a fairer student loan repayment system that is based on marginal rates. They will also increase individual income threshold before they are required to start repaying their loan. The minimum repayment threshold will change from $54,435 in 2024-25 to $67,000 in 2025-26.
This reform will take effect from 1 July 2025, if the legislation is passed.
Meanwhile, the Government has already legislated a cap on HELP indexation based on the lower of the Consumer Price Index or the Wage Price Index. The change was backdated to 1 June 2023, and has reduced outstanding student debt by around $3 billion.
Superannuation Update: No significant new measures introduced
The Government did not announce any new major superannuation measures in the Budget.
There is no change to the legislated rate of 12% for 2025-26
The SG rate is currently legislated to increase from 11.5% to 12% on 1 July 2025. The 12% rate from 1 July 2025 is the final rate increase.
Employers cannot use an employee’s salary sacrificed contributions to reduce the employer’s extra 0.5% of super guarantee. The ordinary time earnings (OTE) base for super guarantee purposes specifically include any sacrificed OTE amounts.
High-income earners should consider avoiding unintentionally breaching the concessional contributions cap ($30,000 for 2024-25 and 2025-26). The increase in the SG rate to 12% from 1 July 2025 means that the SG opt-out income threshold will decrease to $250,000 from 1 July 2025 (down from $260,870).
Andersen in Australia Comment:
The surprise reduction in the personal income tax rates from July 2026 onwards provides some welcomed relief for resident taxpayers, particularly those in the lower to middle-income brackets.
With regards to the increase in the HELP Debt repayment threshold, this is a positive step towards ensuring that repayments are more manageable and reflect individuals’ capacity to pay, potentially benefiting recent graduates who are just starting their careers.
After constant changes to Superannuation in prior year Budget announcements, the Government had no new announcements in this year Budget. The super industry has already been dealing with navigating the uncertainty around the proposed Division 296 regime for superannuation account balances above $3m from 1 July 2025. The status of the proposed Div 296 regime may be subject to the outcome of the Federal election, if not passed before the calling of the election.
