Overview
Few surprises were unveiled in the 2025-26 Federal Budget, which largely focused on measures aimed at easing cost of living pressures.
Key to this was extended energy bill relief, and unexpectedly, income tax cuts. Increases to the Medicare levy low-income thresholds were also announced.
Our technical team has reviewed and analysed the Federal Budget announcements. In this Collective View, we explain these measures and how they might affect your advice strategies.
Cost of living measures Energy Bill Relief
Extension From 1 July 2025
The Government will continue to provide energy bill relief for eligible Australian households and small businesses until 31 December 2025.
The energy bill relief will be $150, paid as $75 each quarter over the remaining two quarters. This measure extends the energy bill relief measures originally announced in the 2024–25 Budget.
Strengthening Medicare
From 2025-26
The Government will provide significant additional funding over five years to increase access to bulk billing and to expand the Medicare Urgent Care Clinics Program.
This will include an additional 50 Medicare Urgent Care Clinics across Australia, which will take the total number to 137.
Cheaper Medicines
From 1 January 2026
The Government will provide increased funding to lower the Pharmaceutical Benefits Scheme (PBS) general patient co‑payment from $31.60 to $25.00 on 1 January 2026.
Concession card holders will continue to pay $7.70 for medicines listed on the PBS.
Cutting Student Debt
From 1 June 2025
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. The Government has stated that no one will pay more under the new system, and compulsory repayments will be lower for people earning under around $180,000 and above the current minimum threshold.
Superannuation
From 1 July 2026
The Government will allocate $50.0 million over three years from 1 July 2026 to extend the Tax Integrity Program. This will enable the ATO to continue its engagement program to ensure timely payment of tax and superannuation liabilities by medium and large businesses and wealthy groups. This measure is estimated to increase receipts by $31.0 million in unpaid superannuation to be disbursed to employees. There were no further announcements in relation to superannuation in this budget.
Personal taxation
Personal income tax cuts
From 1 July 2026
The Government will deliver new tax cuts to all taxpayers from 1 July 2026, by reducing the tax rate for taxable income between $18,201 and $45,000 as follows:
- From 1 July 2026, the 16 per cent rate will be reduced to 15 per cent.
- From 1 July 2027, the 15 per cent rate will be reduced further to 14 per cent.
This will provide a tax cut of up to $268 in 2026–27 and up to $536 in 2027-28, relative to current tax settings.
Now that the legislation has the passed through the Senate, the new marginal tax rates for individuals would be as follows:
Increasing the Medicare levy low‑income thresholds
From 1 July 2024
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.
The thresholds are proposed to be increased as follows:
The family income thresholds will increase by $4,216 for each dependent child or student, up from $4,027
Business Taxation
No significant announcements in relation to business taxation
There were no significant business taxation measures announced in this budget.
Social Security
No announcements in relation to social security pensions or allowances
The Government has not made any announcements in relation to changes to any social security allowances or pensions.
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.
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