The 2025 Federal Budget, handed down on Tuesday 25 March, was clearly a pre-election budget, containing few surprises.

There were some minor sweeteners for Australian taxpayers, in particular the reduction in the personal income tax rate in the lowest tax bracket. This will see the tax rate for the bracket between $18,201 and $45,000 reduce from 16 per cent to 15 per cent on 1 July 2026, with a further reduction to 14 per cent from 1 July 2027.

While not significant, it will mean a small increase in income which will be welcome for those struggling with cost-of-living concerns. For example, someone earning $80,000 a year before tax will see an extra $268 during the next financial year, and $536 in the following financial year, compared to this financial year.

Other announcements include:

  • The Medicare levy low-income threshold will increase for low-income earners. However, there is no change to the tax-free threshold.
  • The Coalition has indicated that it won’t support the tax cut.
  • There is also a small relief in energy costs in the form of a $150 energy rebate, however, they don’t go far. Many people were hoping to see an overhaul in the regulations for the energy industry, increasing energy pricing transparency for consumers. In Peter Dutton’s Budget response, the Opposition introduced a National Gas Plan which promised to lower energy bills.
  • The Government continues to commit to strengthening tax integrity by allocating additional funding to extend and expand the ATO’s tax compliance activities, committing $999 million over four years.

In its post Budget response, the Coalition is promising to increase the threshold to $30,000 which will be appealing to small business owners. Since Labor delivered its Budget on 25 March and called an election on 28 March, it has promised to extend the $20,000 instant asset write-off for small businesses for another 12 months. While the 12-month extension is encouraging, it is still fallen short of the permanency that the small businesses and their advisers are hoping for.

Although there are not much tax related measurements in the Federal Budget, the Bill proposing to remove tax deductibility for general interest charges (GIC) and shortfall interest charges (SIC) was passed the following day and will apply to GIC and SIC incurred on or after 1 July 2025. This amendment to the law will have far-reaching impacts on Australians with tax debts.

There are still a number of significant previously announced measures that are not yet enacted, and have the potential to impact tax planning:

  • Payday super draft legislation was only recently released for consultation. If enacted, the effective date is 1 July 2026.
  • The proposed new 15 per cent tax on super fund earnings attributable to a member’s super balance in excess of $3 million is stalled at Senate. There is no indication from the Government that it will walk away from it.
  • Targeted amendments to Division 7A of the Tax Act which were announced before COVID. There has been no progress on this announcement, however there may be political pressure to look at this following the recent Federal Court case that went against the ATO and it is now before the High Court for special leave. Learn more about this landmark case.

This article was first published in the Autumn 2025 issue of Financial Times.