Treasurer, Jim Chalmers, handed down his fourth federal budget on Tuesday night. This budget is an “accidental” budget. With an upcoming federal election pushed back until May due to the Queensland cyclone, the usual time of a May budget could not be accommodated even though one is required each year. Hence this year we have a pre-election March budget. It is also worth noting that most of the items in this budget are dependent on the government being returned at the election.
Here are a few main measures from the budget:
Personal Income Tax – new tax cuts for every Australian taxpayer
The Government will deliver new tax cuts to every Australian taxpayer from 1 July 2026.
These tax cuts are in addition to the first round of tax cuts for every taxpayer that the Government legislated last year, which have been rolling out since 1 July 2024.
Under the Government’s new tax cuts:
• 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.
Personal Income Tax – increasing the Medicare levy low‑income thresholds
The Government will increase the Medicare levy low‑income thresholds for singles, families, and seniors and pensioners from 1 July 2024. The increase to the thresholds ensures that low‑income individuals continue to be exempt from paying the Medicare levy or pay a reduced levy rate.
The threshold for singles will be increased from $26,000 to $27,222. The family threshold will be increased from $43,846 to $45,907. For single seniors and pensioners, the threshold will be increased from $41,089 to $43,020.
Cutting student debt
The Government will reduce all outstanding Higher Education Loan Program (HELP) and other student debts by 20 per cent. This will remove $16 billion from the student loan accounts of three million Australians.
The 20 per cent reduction is in addition to the recent reform to make indexation arrangements fairer, limiting future indexation and retrospectively reducing the indexation applied in 2023 and 2024.
The Government is reforming the student loan repayment system from 1 July this year, subject to the passage of legislation. The Government will also 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.
Even Cheaper Medicines
The Government will provide $784.6 million over four years from 2025–26 (and $236.4 million per year ongoing) to lower the Pharmaceutical Benefits Scheme (PBS) general patient co‑payment from $31.60 to $25.00 on 1 January 2026.
Strengthening Medicare
The Government will provide additional funding of $8.4 billion over five years from 2024–25 (and $2.5 billion per year ongoing) to increase access to bulk billing, including $7.9 billion over four years from 2025–26 (and $2.4 billion per year ongoing) to expand eligibility for bulk billing incentives to all Australians and introduce the new Bulk Billing Practice Incentive Program for general practices if they bulk bill every visit under Medicare.
Energy Bill Relief Fund Extension
The Government will provide $1.8 billion over two years from 2025–26 to continue energy bill rebates of $75 per quarter for eligible Australian households and small businesses until 31 December 2025 to provide cost-of-living relief.
Supporting the Hospitality Sector and Alcohol Producers
The Government will increase support for hospitality venues, brewers, distillers, and wine producers through changes to the alcohol tax settings in Australia, supporting local jobs and regional tourism.
The Government will pause indexation on draught beer excise and excise equivalent customs duty rates for a two‑year period, from August 2025. Under this measure biannual indexation of draught beer excise and excise equivalent customs duty rates due to occur in August 2025, February 2026, August 2026, and February 2027 will not occur. Biannual indexation will then recommence from August 2027.
Banning non-competes for low and middle income workers
Non-compete clauses prevent or restrict workers from moving (or attempting to move) to a competing employer, or from starting or operating a competing business, with a specific geographic location and for a certain duration. They are often broad in scope and significantly reduce worker mobility, especially for lower-paid workers.
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). The Government will also close loopholes in competition law that currently allow businesses to:
• Fix wages by making anti-competitive arrangements that cap workers’ pay and conditions, without the knowledge and agreement of affected workers
• Use ‘no-poach’ agreements to block staff from being hired by competitors.
The Government will consult on policy details, including exemptions, penalties, and transition arrangements and will also consider and consult further on non-solicitation clauses for clients and co-workers and non-compete clauses for high-income workers.
Restricting Foreign Ownership of Housing
The Government will take action to ensure foreign investment in housing supports the Government’s broader agenda to boost Australia’s housing supply by banning foreign persons (including temporary residents and foreign‑owned companies) from purchasing established dwellings for two years from 1 April 2025, unless an exception applies.
Exceptions to the ban will include investments that significantly increase housing supply or support the availability of housing on a commercial scale, and purchases by foreign‑owned companies to provide housing for workers in certain circumstances.
AND FINALLY….
Supporting the Giant Pandas at Adelaide Zoo
The Government will contribute $3.8 million over five years from 2024–25 (and an additional $3.8 million from 2029–30 to 2033–34) alongside the South Australian Government to support the Giant Pandas at Adelaide Zoo.
To find out more about any of the measures outlined above and how they might impact you, please contact your client relationship or trust manager directly. If you're not already a client of Equity Trustees Contact Us
This article was written by Chris Holloway, Senior Manager of our Taxation Services team.