Federal Budget Summary 2025-26

We break down the 2025–26 Federal Budget and what it means for you.

This year’s budget focuses on easing the cost-of-living pressures, enhancing healthcare access, supporting housing affordability, and investing in infrastructure to strengthen Australia’s future. With targeted relief measures and long-term growth initiatives, the government aims to balance immediate challenges while laying the groundwork for a resilient economy.

If you’d like more information on how the budget might affect you or your business check out the full summary Australian Treasury - Federal Budget

Personal income tax cuts

Helping Australians keep more of what they earn

The Government will deliver more tax cuts to all Australian taxpayers, with additional tax cuts in 2026 and 2027. This tops up the first round of the Government’s tax cuts that have been rolling out since July 2024.

The Government will deliver these new tax cuts over two years:

From 1 July 2026, the 16 per cent tax rate, which applies to taxable income between $18,201 and $45,000, will be reduced to 15 per cent.
From 1 July 2027, this tax rate will be reduced further to 14 per cent.

The Government’s new tax cuts will put more money in people’s pockets. A worker on average earnings will get a new tax cut of $268 in 2026–27 and $536 per year from 2027–28, compared to 2024–25 tax settings. In 2027–28, the average combined annual tax cut across all taxpayers is expected to be $2,548, or around $50 per week.

Cost of living measures

Housing

The Government is extending the Help to Buy scheme, enabling homebuyers to co-purchase properties with the Government. This arrangement reduces the deposit and mortgage requirements while increasing both property price and income eligibility caps—to $100,000 for individuals and $160,000 for couples. Additionally, foreign investors will be prohibited from buying established homes for two years starting next month. To further address the housing shortage, the Budget allocates $54 million to accelerate modern construction methods, with the ambitious goal of building 1.2 million new houses by the end of this decade under the National Housing Accord.

Cheaper medicines

The Government is set to reduce the maximum co-payment for medicines on the Pharmaceutical Benefits Scheme (PBS) for all Medicare card holders without concession cards. From 1 January 2026, this cost will drop from $31.60 to $25.00 per prescription, the lowest in 20 years. While pensioners will continue to pay a frozen rate of $7.70. As a result, four out of five PBS medicines will be more affordable for non-Safety Net patients, with even greater savings for those on 60‑day prescriptions.

In addition, the Government is investing $1.8 billion to expand the range of medicines listed on the PBS. This funding will support the introduction of essential treatments, including new oral contraceptives and therapies for endometriosis, lymphoma, menopause, and treatment‑resistant major depression. Since 1 July 2022, 319 new or amended PBS listings have been approved, further enhancing access to critical medications across Australia.

More energy bill relief

Two $75 energy rebates for every household

To further ease everyday expenses, the budget extends energy bill relief measures until December 2025. Every household now gets an extra $150 off their energy bill in the form of two $75 quarterly rebates. Additionally, around one million small businesses will also receive similar support—all part of an extra $1.8 billion commitment to energy rebates. This measure is designed to ease the impact of rising energy costs and stabilize household finances during challenging times.

Childcare subsidies

As previously announced before the Budget, starting from January 2026, parents will be guaranteed a minimum of three days of subsidised childcare regardless of how much they work or study, provided they don't earn more than $533,280 The activity test for early education support will be scrapped. More childcare centres will be built, with the Government committing $1 billion to fund 160 new or expanded centres.

Debt relief for students

The Government is taking robust measures to ease the burden of student debt, aiming to deliver immediate cost‑of‑living relief for millions of Australians. These reforms will reduce a combined $19 billion in student loans for 3 million borrowers and create a fairer repayment system.

Key actions include a 20% reduction in all outstanding Higher Education Loan Program (HELP) and other student debts (subject to legislation) which will remove approximately $16 billion from student loan accounts. This is in addition to recent reforms that have already trimmed an extra $3 billion by moderating indexation both moving forward and retrospectively for the 2023 and 2024 periods.

Furthermore, the repayment threshold is being raised, increasing the income level at which borrowers must start repaying from $54,435 in 2024–25 to $67,000 in 2025–26. Under the new system, no one will pay more than they currently do, and compulsory repayments will be lower for individuals earning under about $180,000.

Medicare levy

Increasing the Medicare levy low‑income thresholds

The new budget increases the Medicare levy low‑income thresholds by 4.7%, meaning more Aussies on lower incomes will either be exempt or pay a reduced rate. For singles, the threshold rises from $26,000 to $27,222, and for families from $43,846 to $45,907. For single seniors and pensioners, the threshold increases from $41,089 to $43,020, while for family seniors and pensioners it goes up from $57,198 to $59,886. This change, effective from July 1, 2024, is expected to provide extra tax relief for over one million Australians.

Superannuation changes coming in 1 July 2025

While not part of the Federal Budget announcements, several significant super-related changes are on the horizon:

Super Guarantee (SG) Rate Increase: From 1 July 2025, the SG rate will rise to 12%, ensuring greater contributions to your retirement savings.
Paid Parental Leave: For the first time, superannuation will be paid on Government-funded Parental Leave Pay. This change, administered by the ATO, will apply to eligible parents who have their baby or adopt on or after 1 July 2025.
Payday Super: Starting 1 July 2026 (subject to legislation), employers will be required to pay super at the same time as salaries. For example, if you’re paid fortnightly, your super will also be paid fortnightly instead of quarterly. You can monitor your super payments via Member Online.

It’s worth noting that these measures are contingent on Labor being re-elected and passing the necessary legislation. With an election looming, these announcements could be subject to change.

Support for small businesses

Easing Financial Strains: The Government is extending energy bill relief until the end of 2025, with roughly one million eligible small businesses receiving up to $150 in direct rebates. Over the last three budgets, these initiatives have saved businesses up to $800 in annual energy costs.

Investing in Energy Efficiency: Through the Energy Efficiency Grants for Small and Medium Sized Enterprises program, a total of $56.7 million is being allocated in grants—each up to $25,000—to more than 2,400 businesses. These grants will fund a variety of energy upgrades, such as replacing inefficient appliances and upgrading heating systems to cut operating expenses.

Support for the Hospitality and Alcohol Sectors: The Government is also supporting the hospitality sector and alcohol producers by pausing the indexation on draught beer excise and equivalent customs duties, along with continued support under existing excise relief schemes. This targeted relief is expected to reduce costs by an estimated $165 million over five years, easing financial pressures on these industries.

Boosting Tax Relief: Additionally, around 1.5 million sole traders are set to benefit from broader tax cuts, ensuring that small businesses across Australia experience tangible financial relief.

Leveling the Playing Field: In an effort to foster fair trade practices, the Government will work with states and territories to extend protections against Unfair Trading Practices and Unfair Contract Terms to small businesses under the Franchising Code. A dedicated $7.1 million investment over the next two years will bolster the Australian Competition and Consumer Commission’s enforcement capabilities in this area.

Enhancing Digital and Cyber Security: Responding to the increasing need for digital transformation, the Government has already committed over $60 million since the 2023–24 Budget. Through initiatives like the Digital Solutions program, Cyber Wardens program, Small Business Cyber Resilience Service, and Cyber Health Check, small businesses are being equipped with the tools and safeguards necessary to seize online opportunities and mitigate cyber threats.

Each of these measures underscores the Government's commitment to easing operational costs, promoting energy efficiency, and ensuring that small businesses remain competitive and resilient in a rapidly changing marketplace.

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