Federal Budget 2025: Personal Tax Measures

Personal Tax Rate Cuts from 1 July 2026 and 2027

The Government has proposed reducing the personal income tax rate for the lowest income threshold:

• From 1 July 2026: The tax rate for incomes between $18,200 and $45,000 will drop from 16% to 15%.
• From 1 July 2027: The rate will be further reduced to 14%.

These changes will provide all Australian taxpayers with:
✅ Up to $268 in tax cuts from 1 July 2026
✅ Up to $536 in tax cuts from 1 July 2027

The Government describes these tax cuts as “modest but meaningful” cost-of-living relief while addressing bracket creep, benefiting low- and middle-income earners the most.

Example: Isha & Cameron’s Tax Savings

Isha (a registered nurse) and Cameron (a truck driver) each earn $80,000 per year. Under the proposed tax cuts:

• In 2026-27, they will collectively pay $536 less tax.
• In 2027-28, they will collectively save $1,072.
• Combined with existing Stage 3 tax cuts, their total tax savings will be $4,430 in 2027-28 compared to 2023-24 tax rates.

Other Key Tax Updates

• No changes were made to the Low Income Tax Offset (LITO), which remains at a maximum of $700.
• Foreign residents are not expected to benefit from these tax cuts, as they do not receive the tax-free threshold.

Medicare Levy Low-Income Thresholds for 2024-25

The Medicare levy low-income thresholds have been increased for the 2024-25 income year:

• Singles: $27,222 (up from $26,000)
• Couples (no children): $45,907 (up from $43,846)
• Additional amount per dependent child/student: $4,216 (up from $4,027)
• Single seniors & pensioners (SAPTO eligible): $43,020 (up from $41,089)
• Senior & pensioner couples: $59,886 (up from $57,198), plus $4,216 per dependent child/student

These increased thresholds will apply from 2024-25 onwards, subject to legislative approval.

Energy Bill Rebate Extended: Extra $150 in 2025

Households and around one million small businesses will receive a further $150 energy rebate, paid in two $75 quarterly instalments from 1 July 2025. This is in addition to previous rebates already rolled out.

Help to Buy Home Scheme Expanded

The Help to Buy scheme will receive an additional $800 million, increasing the total Government investment to $6.3 billion. Key changes:

• Income cap increases:
  • Individuals: $90,000 → $100,000
  • Joint applicants & single parents: $120,000 → $160,000
• Property price caps adjusted to reflect average house prices in each State/Territory, increasing affordability.
  • NSW (capital cities & regional centres): $1.3 million
  • NSW (rest of the state): $800,000

The Help to Buy program will open later in 2025, following State legislation approvals and the finalisation of Program Directions.

Early Childhood Education: Child Care Subsidy Expansion

From January 2026, the Child Care Subsidy (CCS) activity test will be replaced with the Three Day Guarantee, ensuring families receive at least 3 days per week of subsidised early childhood education and care.

The Government has allocated $4.5 million over four years (from 2025-26) to Services Australia to implement this change.

Beer Excise Indexation Frozen for 2 Years

The indexation of draught beer excise and customs duty rates will be paused for two years (from August 2025 to August 2027). This means:

• Scheduled biannual increases in excise duty (due in August 2025, February 2026, August 2026, and February 2027) will not occur.
• Indexation will resume from August 2027.

Foreign Ownership of Housing: ATO to Enforce Ban

From 1 April 2025, foreign residents (including temporary residents and foreign-owned companies) will be banned from purchasing established dwellings for two years, unless an exemption applies.

The Government will also enforce land banking regulations to ensure:

• Foreign investors develop land within a reasonable timeframe
• Vacant land is not held purely for speculative gains

Exceptions may apply where investments significantly increase housing supply or support worker accommodation.

Reduction of HELP Debts

The Government confirmed major changes to the Higher Education Loan Program (HELP):

• HELP debts will be reduced by 20% before indexation (on 1 June 2025), removing $16 billion in student debt.
• More than 3 million Australians will benefit from this change, cutting total student debt by around $19 billion.
• A new repayment system will be introduced, allowing individuals to earn more before making repayments.
• HELP indexation is now capped at the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI) (backdated to 1 June 2023).

These measures are subject to legislation and will take effect from 1 July 2025.

Key Takeaways

The 2025 Federal Budget delivers modest tax relief, energy rebates, home-buying support, and student debt reductions. Key changes include:

✅ Lower personal tax rates from 2026
✅ Higher Medicare levy thresholds
✅ Extended energy rebates
✅ Expanded home ownership support
✅ Reduced HELP debts

With further legislative approvals pending, it’s important to stay informed and plan ahead for these upcoming changes.