The Federal Budget 2025/26

Noted as the budget for voter appeal, the 2025/26 budget released by the Albanese government yesterday includes measures such as tax cuts for individuals and extensions to existing measures.​

Here’s a breakdown of key areas impacting businesses and individual taxpayers.​

While a big headline of this year’s Federal budget, in reality these cuts deliver a very modest saving.​

From 1 July 2026, the proposed tax rate for the $18,201 - $45,000 income tax bracket will reduce from 16% to 15%, further reducing to 14% from 1 July 2027. This cut has been deemed ‘modest’ as the individual saving represents a maximum of $268 in the 26/27 financial year and $536 from the 27/28 year.​

The low-income threshold for Medicare levy exemption will increase, impacting tax returns from the current 2024/25 year onwards. The increase ensures that low-income earners continue to be exempt from paying the Medicare levy.​

The threshold for a single individual will change from $26,000 to $27,222, and for families from $43,846 to $45,907.​

The 25/26 budget provides a 20% cut to existing student debt, and increases the repayment threshold from $54,435 to $67,000 in the 2025/26 financial year.​

The Government will ban non-compete clauses that apply to workers earning less than the high income threshold in the Fair Work Act (currently $175,000). Non-compete clauses are conditions in employment contracts that prevent or restrict an employee from moving to a competitor.​

Competition law changes will also prevent businesses from:​

Indexation on draught beer excise and excise equivalent customs duty rates will be paused for two years from August 2025, resuming in August 2027.​

Excise remission and WET producer rebate caps will increase from $350,000 to $400,000 for eligible brewers, distillers and wine producers from 1 July 2026.​

Eligible households and small businesses will receive two $75 rebates between 1 July 2025 and 31 December 2025.​

The additional 35% tariffs on goods produced or manufactured in Russia or Belarus will continue in support of Ukraine.​

Two measures from last year’s budget remain in the 2025/26 budget but have stalled in Parliament:​

 If they are not approved before the election, these measures will lapse.​

Australia’s economy is expected to grow at a rate of 2.25% in 2025/2026 and 2.5% in 2026/2027.​

The cash balance will be a deficit of -$42.1 billion in 2025/2026. This is expected to improve but with a continued deficit for several years.​

Unemployment has stayed low but is expected to peak at 4.25%.​

Annual real wages have grown for five consecutive quarters and are forecast to grow by 0.5% in 2024/2025.​

Inflation is expected to be 2.5% throughout the year to the June 2025 quarter.​

Global trade tensions are affecting economic conditions, with indirect tariff impacts estimated to be nearly four times greater than the direct effect on Australia, reflecting the relative importance of affected trade between Australia, China and the US.​