2025 Federal Budget
26 March 2025
With a looming Federal Election, last night the Australian Government handed down the 2025-26 Federal Budget.
It is no surprise that ongoing cost-of-living pressures, with added global challenges of trade wars as well as the seemingly never-ending debate about housing affordability continue to affect consumer confidence, and featured in the Budget proposals.
Please note that these proposals are not yet legislated, and as always, the team at AGS Financial Group are well placed to advise you on your strategic options as these proposals progress.
Key elements of the budget include:
Taxation
Personal income tax rate cut from 1 July 2026 and 1 July 2027
The Government has proposed a range of measures to combat cost of living pressures, the main one being a tax cut for every Australian taxpayer. The reduction in tax is only modest, with the 16% marginal tax rate reducing by 1% in 2026-27, and a further 1% reduction in 2027-28. The delivery of the tax cuts is staggered over 2 years to ensure they do not contribute to a resurgence of inflation.
Increase to Medicare Low Income Threshold
The Government will increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners retrospectively from 1 July 2024. This is a routine increase to the thresholds to ensure that low-income individuals continue to be exempt from paying the Medicare levy or pay a reduced levy rate.
Cost of Living
Extending the Energy Bill Relief
The Government will extend energy rebates until the end of 2025, providing another $150 in energy bill relief to all households and eligible small businesses. Currently energy bill relief of $300 is available to all households and to eligible small businesses until 30 June 2025. The rebates will be automatically applied to electricity bills between 1 July and 31 December 2025 in 2 quarterly instalments of $75.
Increasing the number of free General Practitioner (GP) visits
The Government plans to fund 18 million extra bulk-billed GP visits per year by 2030 via increasing the Medicare rebates for a standard consultation:
to $69.56 from $42.85 for metropolitan areas
to a maximum of $86.91 for remote areas.
The increase in rebates include an extra 12.5 per cent that will be paid to practices that switch to bulk-billing only.
Lowering the maximum cost of medicines on the Pharmaceutical Benefits Scheme (PBS)
The Government will cap the price of medicines covered under the PBS at $25 per script. This is a
reduction from the current $31.60 per script, and provides a saving for individuals who don’t hold a concession card. Proposed from 1 January 2026
Cutting Student Debt
The Government will reduce all outstanding Higher Education Loan Program (HELP) and other student debts by 20 per cent from 1 June 2025.
In addition, from 1 July 2025 the Government will increase the amount that people can earn before they are required to start paying back their loans from $54,435 in 2024–25 to $67,000 in 2025–26.
Business
Instant asset write-off:
This crucial measure has not been included in the 2025-26 Federal Budget. Last year it was announced that businesses with turnovers capped at $10 million can deduct $20,000 from all eligible assets until 30 June 2025. That is also yet to be legislated by the Federal Government.
Banning non‑compete clauses for low and middle income workers
The Government will ban non‑compete clauses for low and middle income workers to remove the impediment to moving to more productive, higher‑paying jobs and starting their own business.
The ban on non-compete clauses will apply to workers earning less than the high-income threshold in the Fair Work Act (currently $175,000).
Housing Affordability
Restricting Foreign Ownership of Housing
The Government has announced a range of measures to apply restrictions to the foreign ownership of housing. This includes banning foreign persons (including temporary residents and foreign‑owned companies) from purchasing established dwellings for two years from 1 April 2025, unless an exception applies. Exceptions 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.
Help to Buy program
The Government will increase funding for the Help to Buy program, by increasing income caps from $90,000 to $100,000 for singles and from $120,000 to $160,000 for joint applications. In addition, the property price cap will be increased.
Under the Help to Buy program the Government provides an equity contribution of up to 40% which assists people to buy homes with lower deposits and smaller mortgages. The legislation for the Help to Buy scheme was enacted in December 2024, however the scheme is
not yet operational.
Social Security & Aged Care
No announcements in relation to an extension of the deeming rate freeze
Social security deeming rates are currently frozen at 0.25% and 2.25%. The freeze on deeming rates is scheduled to end on 30 June 2025, however there was speculation that the Government would make an announcement regarding a possible extension. No announcement regarding deeming rates was included in the Federal Budget (but may feature in the upcoming election campaign).
Strengthening the National Disability Insurance Scheme
The Government has announced it will provide additional funding over four years from 2025–26 to further safeguard the integrity of the National Disability Insurance Scheme (NDIS) and support people with disability. This includes funding to allow the National Disability Insurance Agency to detect and respond to fraud.
Aged care reform and funding pay increases for aged care nurses
The Government has announced additional funding to continue the delivery of aged care reforms and the implementation of recommendations from the Royal Commission into Aged Care Quality and Safety.
The Government has also announced additional funding to increase the minimum award wages of registered and enrolled nurses employed in the aged care sector.
Abolishing the Child Care Subsidy activity test
The Child Care Subsidy activity test will be abolished from 5 January 2026 and families will be eligible for at least 72 hours of subsidised Early Childhood Education and Care per fortnight (3 days per week), regardless of their activity levels. Families earning more than $533,280 will remain ineligible for subsidised childcare.
Contact us for advice and assistance.
Naturally, as these measures become law, we are on hand to assist you with understanding and responding to the changes. As always, please contact us should you require any advice or assistance with your plans.