The Federal Budget this year is framed around the upcoming election so there is no surprise that it contains measures to reduce the tax burden on individuals, including a reduction in the income tax rate.
For business, there were no major tax changes announced. Other policy initiatives announced focus on strengthening enforcement of the Franchise Code, tackling illegal phoenix activities, 20-day payment times for small business and banning non-compete clauses for low- and middle-income workers.
Foreign investors are also in the spotlight as the Government announced plans to ban foreign investors from buying established homes for at least 2 years from 1 April 2025. Limited exceptions will be provided for investments that increase housing supply on a commercial scale and certain purchases of housing for workers.
The key tax related changes you should be aware of are outlined in this Alert.
Individuals
Power bill relief for households
The power bill relief for all eligible households will be extended to 31 December 2025. Under this scheme, the Government will deliver rebates of $75 per quarter (up to $150 in total).
Personal Income Tax Rates
From 1 July 2026, Australian resident individual taxpayers will receive further tax cuts. These are in addition to the stage 3 tax cuts that came into force on 1 July 2024. The tax cuts will reduce the marginal rate of income tax for taxable income between $18,201 and $45,000. This is summarised in the table below (which does not include the Medicare Levy which remains at 2%):
| Taxable Income ($) | Marginal Tax Rate 2025 and 2026 | Marginal Tax Rate From 1 July 2026 | Marginal Tax Rate From 1 July 2027 |
| 0 – 18,200 | Nil | Nil | Nil |
| 18,201 – 45,000 | 16% | 15% | 14% |
| 45,001 – 135,000 | 30% | 30% | 30% |
| 135,001 – 190,000 | 37% | 37% | 37% |
| 190,001+ | 45% | 45% | 45% |
Medicare Levy
As in prior years, from 1 July 2024, the Government will increase the Medicare Levy low‑income thresholds for singles, families, seniors and pensioners. This is to provide cost‑of‑living relief. The increase to the thresholds ensures that those on low-income continue to be exempt from paying the Medicare Levy or pay a reduced levy rate.
University Student Loan Balances
The government has announced a 20% reduction in outstanding university student loan balances, expected to take effect later this year pending parliamentary approval. This measure is set to benefit over 3 million people and reduce total student debt by $16 billion.
Business Incentives
Small business power bill relief
The power bill relief for eligible small businesses will be extended to 31 December 2025. Under this scheme, the Government will deliver rebates of $75 per quarter (up to $150 in total).
No New Small business instant asset write-off
The previous budget extended the $20,000 instant asset write-off to small businesses to 30 June 2025. In this budget, the Government has not extended the program beyond 2025.
Excise on Alcohol
To support the hospitality industry and alcohol producers, the Government will pause biannual indexation on draught beer excise and excise equivalent customs duty rates until August 2027. It will also increase the support available under the existing Excise remission scheme for alcohol manufacturers and the Wine Equalisation Tax producer rebate.
Foreign Investment
Foreign resident capital gains tax regime
The Government previously announced changes to the foreign resident capital gains tax (‘CGT’) rules to ensure foreign residents pay their fair share of tax in Australia. Currently, foreign residents are only subject to CGT when they dispose of assets which are Taxable Australian Property (broadly, real property situated in Australia).
The amendments were to:
- Clarify and broaden the types of assets that foreign residents are subject to CGT.
- Amend the point‑in‑time principal asset test that applies to indirect interests in Australian real property to a 365‑day testing period.
- 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.
These measures were planned to commence on or after 1 July 2025. They have now been deferred to the start of the first quarter after the Act containing the new measures receives Royal Assent.
Managed Investment Trusts (MIT)
In the lead up to the 2025-26 Federal Budget, the Government announced that it plans to amend the income tax laws to ensure that genuine widely held foreign based investors (such as foreign pension funds) can continue to access concessional withholding tax rates in Australia on eligible distributions. Measures intended to strengthen safeguards against potential misuse were also announced. These changes have been reiterated in the 2025-26 Federal Budget.
The start date for new measures that extend the clean building MIT withholding tax concession (currently 10%) to data centres and warehouses that meet energy efficiency standards has been delayed from 1 July 2025 to the start of the first quarter after the Act containing the new measures receives Royal Assent.
Extending additional tariffs on goods from Russia and Belarus
The Government will extend the application of an additional 35% tariff on goods imported from Russia and Belarus for a further two years (to 24 October 2027).
Tax Compliance
Funding Support for the Australian Tax Office and Tax Practitioners Board
The budget contains additional funding for the Australian Taxation Office (ATO) to strengthen the Tax Avoidance Taskforce, the Shadow Economy Compliance Program, the Personal Income-tax Compliance Program and the Tax Integrity Program. The ATO will receive $1 billion over 4 years for these programs. There is also additional funding for the Tax Practitioner Board (TPB) to increase the ability of the TPB to protect taxpayers from tax agent misconduct and maintain community confidence in the integrity of the tax system.
If you would like to learn more about the 2025-26 Federal Budget, please contact Calibre Business Advisory on (02) 9261 2177. Our dedicated team will be more than happy to assist.