The 2025 Federal Budget – briefly:
- Personal income tax reductions: The starting rate of income tax will reduce from the current 16% to 14% by 2027–28. This will cost an estimated $17.1 billion over the forward estimates period.
- Cost-of-living relief: The extension to the Energy Bill Relief Fund through to 31 December 2025 at a cost of $1.8 billion will be welcomed by many, as will the measures to increase the amount of Medicare bulk billing and reduce the price of medicines under the Pharmaceutical Benefits Scheme.
- Budget deficit and debt: The budget shows an expected deficit in the underlying cash balance for 2024–25 of $27.6 billion, or 1% of GDP. However, larger deficits are forecast over the remainder of the forward estimates period to 2028–29.
- Economic forecasts: Certain other forecasts over the forward estimates may be seen as relatively encouraging, with real GDP growth increasing to 2.75% and unemployment steadying at 4.25%.
- Taxation and productivity: While the ATO is receiving nearly $1 billion in additional funding for compliance activities, the budget does not signal any tax reform which may be needed to fuel Australia’s future growth and to protect our competitive position globally.
What does the Federal Budget mean for Australians.
The government’s budget, ahead of what many are calling the ‘cost-of-living election’, aims to provide modest relief for Australians under financial pressure.
- 1 July 2026 is the commencement date of the additional personal income tax rate cuts and when individuals will see a further increase in their take-home pay.
- $19 billion wiped from existing HELP and student loan debts via a 20% reduction to all debts.
- $1.8 billion committed to combating cost-of-living pressures, in the form of additional quarterly energy bill rebates for over 10 million households.
- $648 million in Medicare levy relief for low-income earners.
What does this mean for you?
- Increase in take-home pay from 1 July 2026 due to a reduction in the 16% personal income tax rate.
- 20% reduction of HELP and student loan balances and a revision of future repayment thresholds and methodology.
- Cost-of-living relief via two additional $75 quarterly energy bill rebates for households.
Need to Discuss your personal Tax plan call 03 94042737 www.northcityaccountants.com.au
