On Tuesday night, 25 March 2025, Federal Treasurer Jim Chalmers handed down his fourth Federal Budget for the Labor Government. The Treasurer says that this Budget is built on five main pillars:
- Helping with the cost of living
- Strengthening Medicare
- Building more homes
- Investing in every stage of education
- Making our economy stronger, more productive and more resilient.
This budget marks a return to a deficit, following two consecutive years of surplus. However, running persistent surpluses can sometimes be more detrimental than maintaining modest deficits. A surplus-driven approach may be the result of underinvestment in critical areas such as public services and infrastructure, potentially hindering long-term economic growth and development.
It’s also essential to remember that governments are not businesses and do not have the same profit-driven objectives. While deficits are not inherently problematic, it is vital that these deficits are manageable.
Given the current state of global fiscal uncertainty, particularly the ongoing trade tensions under President Trump’s administration, we also may face additional economic challenges in the future.
Outlined below are some of the key budget initiatives that may directly impact our clients. As with all budgetary measures, these measures are not final until the relevant legislation has been passed by the Government. We will keep you updated on the status of any proposed measures.
Impact for individuals
✅ Cuts to individual tax rates
- From 1 July 2026, the 16% marginal tax rate (for incomes between $18,201 – $45,000) will drop to 15%, and then to 14% from 2027. This is a saving of $268 for all taxpayers in the first year, and $536 in the second. Noting that the Coalition will not support the tax rate changes with the Shadow Treasurer commenting that “Seventy cents a day, in a year’s time, is not going to help address the financial stress Australian families are currently under”.
✅ Medicare Levy Relief
- Low-income thresholds have been increased, exempting over 1 million Australians from paying the Medicare levy.
✅ Cheaper Medicines
PBS co-payments will drop from $31.60 to $25 from 1 January 2026, saving households over $200 million annually. Additional subsidies for medicines like contraceptives and endometriosis treatments.
✅ Energy Bill Relief
Extra $1.8 billion allocated to extend energy rebates into 2025. Eligible households receive two extra $75 quarterly rebates.
✅ Higher Education
HECS debts and other student loans to be reduced by 20%. This will remove $16 billion from student loan accounts of 3 million Australians.
From 1 July 2025, the minimum repayment threshold to increase to $67,000 (from $54,435).
- 100,000 free TAFE places from 2027 – aimed at tackling shortages in the construction industry and healthcare.
✅ Limiting Non-Compete Clauses
One in five workers are subject to non-compete clauses in their employment contracts that restrict their ability to move to a new job and are significantly suppressing wages. The Government will ban these clauses for low and middle income earners. This measure is expected to boost wages as these workers will be able to move to more productive, higher-paying positions.
Impact for businesses
The Budget contained a few measures to help small businesses:
✅ Energy Rebates Extended
Over 1 million small businesses to continue receiving electricity bill relief through 2025.
✅ Instant Asset Write-off
Extension of the $20,000 instant asset write-off was noticeably absent from this year’s Budget. The $20,000 threshold should extend to 30 June 2025 (with legislation currently before Parliament, but if an election is called the bill will lapse). From 1 July 2025, without an extension, this will revert back to the legislated threshold of $1,000 for the first time in almost 10 years.
✅ Tax System Overhaul & Compliance
$1.8 billion in revenue improvements from increased ATO funding to combat tax evasion and shadow economy activity.
Funding to crack down on illicit tobacco trade and reduce unfair market practices.
✅ Phoenixing & Fair Trading
New measures to tackle illegal phoenix activity, with funding to ASIC to target high-risk sectors like construction.
Enhanced protections from Unfair Trading Practices, including better enforcement on unfair contract terms and surcharges.
✅ Digital Upgrades
Funding to enhance business register systems, including linking Director ID numbers to company records.
We will keep you up-to-date with the progress of the implementation of these Budget measures.
If you would like to discuss the tax implications of the budget proposals, please call us on (07) 56656469.
DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.
Jeanette has over 20 years experience as an accountant in public practice. She is a Chartered Accountant, registered tax agent and accredited SMSF Association advisor. When she is not helping business owners grow their empires, you will likely find her out running on the trails or at the gym. Book in to see Jeanette today.
