Federal Treasurer Jim Chalmers handed down the 2025-26 Federal Budget on Tuesday March 25 2025, the last before Labor heads to the polls. As expected, the era of budget surpluses has come to an end, with the government forecasting a return to deficits for the foreseeable future.

While Chalmers struck a cautiously optimistic tone on inflation, he was reluctant to declare all-out victory. The cost of living remains high and most of the Budget’s highest profile proposals are aimed at easing the financial burden many Australians are facing.

That includes surprise tax cuts and more energy bill relief for Australian households. In this Budget wrap-up, we take a look at some of the biggest announcements and what they might mean for you and your family

Extending the energy bill rebate

Another round of energy bill relief is on its way, with Labor pledging to extend its energy rebates until the end of the year. The move will cost around $1.8 billion and will see $150 in rebates automatically applied to energy bills for all Australian households and around 1 million small businesses.

Top up tax cuts

In a move that very few suspected was in the cards, the government announced it will be delivering another round of (admittedly, more modest) tax cuts. It plans to reduce the 16% tax bracket (which applies to earnings between $18,201 and $45,000) to 15% on July 2026, before further trimming it to 14% the following year.

Once implemented, these “top up tax cuts” will give the average worker an extra $268 from July 2026 and $536 in every year from July 2027. Chalmers claims the combined tax cuts and energy rebates will save the average household with two earners around $15,000 over four years.

Historic investment in Medicare

Labor had made a number of announcements around healthcare ahead of the election, but by far the splashiest is a proposed $8.5 billion in extra funding for Medicare. The money will be spent over four years and will help make nine out of every ten visits to a GP free by 2030.

Described by the government as the single largest investment in Medicare since its inception, the package will also help deliver the next generation of healthcare practitioners, with funding for 400 nursing and midwifery scholarships and 2,000 new GP trainees each year by 2028.

Around $689 million has also been earmarked to help reduce the maximum price of medicines on the Pharmaceutical Benefits Scheme from $31.60 to $25 a script. The move — which comes as US pharmaceutical companies have recently taken aim at the PBS — hopes to save Australians an estimated $200 million each year.

Helping Australians to buy a home

Rising property prices have been an ever-present thorn in the side of younger Australians, and as part of its efforts to make home ownership attainable, the government has announced plans to modify its signature housing policy.

The Help to Buy scheme, which will commence later this year assuming Labor is re-elected, aims to reduce the upfront and ongoing costs of purchasing a home by letting Australians co-buy property with the government.

The government intends to broaden the scheme by increasing both the income caps for home buyers and the price caps for properties. The changes will inject an extra $800 million into the scheme, bringing its total cost to $6.3 billion.

Supporting renters

Recognising the mounting challenges faced by renters, the government will be increasing the maximum rates of Commonwealth Rent Assistance by 45% for around 1 million households. It will also look to increase rental housing supply by 80,000 over the next decade by refining the Build to Rent tax concessions announced in the 2023-24 Budget.

Student debt

Following previous commitments to reduce annual HECS-HELP repayments and increase the income threshold before graduates must repay their loans, the government will be offering further support in the form of a 20% cut to HECS-HELP debts. For the average graduate with an outstanding balance of $27,600, that will amount to around $5,520 in debt relief.

The government has also promised to make 100,000 fee-free TAFE places available each year if it retains government, with plans to make the program permanent nationwide.

Improving access to childcare

Labor will move closer towards its stated goal of providing universal childcare by scrapping the ‘activity test’ parents must pass before accessing subsidies.

Starting January 2025, parents will be guaranteed at least three days of subsidised childcare so long as they don’t earn more than $533,280. Previously, they had to show they studied, worked or looked for work for at least 16 hours each fortnight — a requirement which the Productivity Commission said only hurt families without boosting workforce participation.

On top of that, a $1 billion fund will be established to support the construction and expansion of more than 160 new childcare centres. It’s estimated that this will create around 12,000 more places for children in areas of need.

Supporting infrastructure and industry

The government will provide further investment in a number of infrastructure projects — with a focus on road infrastructure in particular — across all states and territories. The commitments laid out in the budget documents include:

• $7.2 billion to upgrade the Bruce Highway in Queensland
• $2.3 billion for Western Sydney infrastructure projects in NSW
• $2 billion to upgrade Sunshine Station in Victoria
• $350 million to upgrade the Kwinana Freeway in Western Australia
• $200 million for Duplication of Stuart Highway in the Northern Territory
• $200 million to upgrade the Arthur Highway in Tasmania
• $50 million to upgrade the Monaro Highway in the ACT

Recovery efforts for communities affected by Cyclone Alfred 

The full fiscal impact of Cyclone Alfred remains to be seen, but the Budget contains a handful of significant measures aimed at supporting those affected. That includes $1.2 billion to fund response and recovery efforts for Cyclone Alfred and other disasters, and $200 million to support disaster resilience and risk reduction through the Disaster Ready Fund.

As always, 1 July brings with it a number of changes in the tax, super and financial landscape. Some were first outlined in the 2023-24 Federal Budget in May this year, while others have been in the pipeline for much longer. Here are some of the main changes you should know about going into the new financial year.

Increase to the superannuation Transfer Balance Cap

The general Transfer Balance Cap (TBC) — which is the maximum amount of super that can be transferred into a retirement phase account — has been increased from $1.7 million to $1.9 million.

If any transfers to your pension account exceed this limit, you may have to take the excess money out of your pension account (either by withdrawing it or transferring it to an accumulation account) and pay tax on any earnings related to it.¹

The increase could have implications for anyone planning to commence a retirement phase pension or those who haven’t yet fully utilised their TBC. If you already have a retirement phase income stream on 1 July, you will have your own personal TBC (and receive only a portion of the $200,000 increase), which you can find using the myGov online portal or by contacting the ATO.

Super Guarantee bumped up to 11%

The Super Guarantee increased from 10.5% to 11% on 1 July, meaning your employer will be putting a slightly larger percentage of your salary into your super. It will continue to increase by 0.5% each year until it reaches 12% in 2025.

Minimum pension drawdown rates revert to pre-COVID levels

On 1 July, the Government ended the 50% reduction in minimum account-based pension drawdown rates. It had introduced this in 2020 to help retirees better manage their finances during the tumultuous pandemic period. Now that the minimum percentages have reverted to pre-COVID levels, retirees should consider re-examining their investment strategies to make sure they can accommodate the higher drawings.

Here are the minimum drawdown rates that apply in the 2023-24 financial year:

Increase to the eligibility age for Age Pension

On 1 July, the eligibility age for the Age Pension was increased to 67 for Australians born on or after 1 January 1957. Previously, the eligibility age was 66 years and 6 months.

Income thresholds go up for Medicare Levy Surcharge and Private Health Insurance Rebate

The income thresholds used to calculate the Medicare Levy Surcharge have gone up for the first time in eight years. As of 1 July 2023, individuals earning more than $93,000 and couples with a combined income higher than $186,000 (plus $1,500 for each dependent child after the first child) will face the Medicare Levy Surcharge if they don’t have private hospital cover.

This also means that individuals earning less than $144,001 and couples with a combined income lower than $288,001 (plus $1,500 for each dependent child after the first child) can receive the Private Health Insurance Rebate for their private hospital cover premiums.

Low- and middle-income tax offset draws to a close

The Government hasn’t announced any changes to tax rates or income thresholds for the 2023-24 financial year. As scheduled, the low- and middle-income tax offset (LMITO), which offered tax relief to Australians earning less than $126,000 per year, will not be reinstated. The tax offset was rolled out as a temporary measure in the 2018-19 financial year but was extended three times to ease cost of living pressures during the pandemic. Its expiration is expected to affect more than 10 million Australians.

Looking forward, the Labor government also plans to go ahead with the stage three tax cuts, which were passed by the Morrison government back in 2019. Due to come into effect July 2024, the cuts will abolish the 37% tax bracket on incomes between $120,000 and $180,000 and flatten the tax rate for those earning between $45,000 and $200,000 to 30%.

Eligibility for the Home Guarantee Scheme proposed to be expanded

Starting July 2023, the government has proposed that eligibility for the First Home Guarantee and the Regional First Home Buyer Guarantee will be expanded to include friends and family members. Currently, only spouses and de facto partners can apply. The two schemes are also proposed to become available to non-first home buyers, on the condition that they haven’t owned a property in Australia in the last ten years and that they are permanent residents (rather than just citizens).

Additionally, the Family Home Guarantee — which lets eligible single parents purchase a home with a deposit of as little as 2% — is also proposed to become available to legal guardians of children.

Cheaper childcare available for families

On 10 July, the Child Care Subsidy rates were raised from 85% to 90% for families on a combined annual income of $80,000 or less. For families who earn more than that, the subsidy rate will decrease by 1 percentage point for every additional $5,000 of family income until it reaches 0% for families earning $530,000. The higher subsidy rates are part of a $55.31 billion package to help reduce childcare costs for Australian families over the next four years.

For more information about these changes, visit the relevant government website or consider speaking to a qualified financial adviser, who will be able to explain how they might affect you and your financial goals.

Sources

1 https://www.ato.gov.au/Individuals/Super/In-detail/Withdrawing-and-using-your-super/Transfer-balance-account/