March 2025 Federal Budget Summary

What This Budget Means for You

The 2025-26 federal budget focuses on easing the cost of living for Australians. Key initiatives include income tax reductions and the extension of energy bill rebates. Additionally, the budget allocates funds to critical areas such as healthcare, education, and housing.

So, how will this budget affect you?

Small to Medium Business

Energy Bill Relief

The government is extending energy bill relief to eligible small businesses and Australian households with two $75 bill rebates directly off their electricity bills until 31 December 2025.  This will be applied automatically by the electricity provider.

Funding for ATO Compliance Programs

The government has set aside $999M over 4 years for the ATO to expand its tax compliance programs, including:

• Tax Avoidance Taskforce

• Shadow Economy Compliance Program

• Personal Income Tax Compliance Program

• Tax Integrity Program (medium to large businesses and wealthy groups)

This significant funding will result in increased audit and compliance activity and scrutiny of taxpayer lodgements. We are already seeing increased activity in this area and this additional funding will only expand that activity.

Funding for Regulators to Support and Protect Businesses and Franchisees

The government has announced funding of $12M to enhance the regulation and oversight of the franchising code of conduct, improve detection of phoenixing activities particularly in the construction sector, support social enterprises focused on employment for disadvantaged Australians and extend protections against unfair trading practices to small businesses.

No further Extension to the Small Business $20,000 Instant Asset Write-Off

Last year’s Federal Budget announced an extension of the $20,000 instant asset write off for small businesses until 30 June 2025. This measure has been legislated. The Government has not announced a further extension of the instant asset write off in the 2025-26 Budget. The instant asset write off will revert to its $1,000 limit from 1 July 2025.

Non-Compete Clauses to be Banned

The Government has announced that it will ban non-compete clauses for low and middle-income employees (under the Fair Work Act, the high income threshold is currently $175,000). Non‑compete clauses are conditions in employment contracts that prevent or restrict an employee from moving to a competitor.

Announced Beer Tax Paused and Benefits for Wine and Alcohol Producers

Indexation on the draught beer excise and excise equivalent customs duty rates will be paused for two years from August 2025. This means that the price of beer won’t go up because of tax.

Support is also provided under the Excise remission scheme for manufacturers of alcoholic beverages, increasing caps for all eligible brewers, distillers and wine producers to $400,000 per financial year, from 1 July 2026 (up from $350,000).

Individuals

New personal Income Tax Rates

From 1 July 2026, the government proposes further tax cuts to assist with cost of living pressures.

Proposed New Personal Income Tax Thresholds

Thresholds ($)	Rates in 2024–25 and 2025–26 (%)	Rates in 2026–27 (%)	Rates in 2027–28 (%)
0 – 18,200	Tax free	Tax free	Tax free
18,201 – 45,000	16	15	14
45,001 – 135,000	30	30	30
135,001 – 190,000	37	37	37
>190,000	45	45	45

Medicare Levy Thresholds Increased for Low-Income Earners

The Medicare levy low-income threshold exempts low-income earners from having to pay the levy.  From 1 July 2024, the threshold for the exemption will increase. 

The new thresholds are as follows:

	2024-25	2025-26
Singles	$26,000	$27,222
Families	$43,846	$45,907
Single seniors & pensioners	$41,089	$43,020
Family seniors & pensioners	$57,198	$59,886
Family additional child or student	$4,216	$4,027

Additional ATO Funding Targeting Personal Income Tax Compliance

The Government has announced additional funding to expand the ATO’s Personal Income Tax Compliance Program.  Areas of focus may include excessive or unusual work-related deductions, income not reported from the ‘gig’ economy and rental property expenses. We are already seeing increased activity in this area and this additional funding will only continue and expand this activity.

Announced 2-Year Ban on Foreign Ownership of Established Homes

From 1 April 2025, the Government has banned foreign and temporary residents, and foreign-owned companies, from purchasing established dwellings to prevent ‘land banking’. The ban applies for 2 years and is subject to some limited exceptions.  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.

Housing Support Measures

Help to Buy Program

The Government’s ‘Help to Buy’ program provides an equity contribution to eligible participants, reducing the deposit required to buy a home. Under the program, Housing Australia provides eligible participants with a Commonwealth equity contribution of up to 30% of the purchase price of an existing home, and up to 40% of the purchase price of a new home. In simple terms, the government will give you the money, but then take a stake in your home.  Originally, to be eligible for the program, the income threshold for a single was $90,000 and, for joint participants, $120,000. The Budget increases these thresholds to $100,000 and $160,000 respectively.

Other Measures:

• A plan to build 1.2M new homes over the next 5 years using the National Housing Accord to create efficient planning and zoning systems

• Investing $54M to accelerate the uptake of modern prefabricated and modular construction methods

• Providing $9.3M to states and territories to combat homelessness and maintain social housing

• Providing increased incentive payments of $10,000 to eligible housing construction apprentices from 1 July 2025 in a bid to increase construction workforce (this is an increase on the current level of $5,000).

Access to Cheaper Medicine

The Pharmaceutical Benefits Scheme (PBS) general patient co-payment will be lowered from $31.50 to $25 on 1 January 2026 for people with a Medicare card and no Commonwealth concession card.

There will also be funding provided for new and amended listings on the PBS, as well as improving access to medicines and expansion of services delivered by community pharmacies.

Cutting Student Debt

The government will reduce all outstanding Higher Education Loan Program (HELP) and other student debts by 20% prior to indexation date of 1 June 2025.  This is in addition to the recent indexation reforms to lower the rate of indexation. This was originally proposed 3 November 2024 and has not as yet been legislated.

They will also increase the repayment income threshold from $54,435 in 2024/25 to $67,000 in 2025/26.

Superannuation

No new superannuation measures were announced.  Here is s recap of the measures previously announced and set to proceed:

• Payday superannuation to proceed from 1 July 2026 requiring employers to align payment of an employee’s superannuation guarantee contributions within seven days of paying the employee’s salary and wages

• Superannuation guarantee rate is set to increase from the current 11.5% to 12% from 1 July 2025 onwards

• Draft legislation before the senate to reduce tax concessions available to individuals with a total superannuation balance exceeding $3M (known as Division 296 tax).

  
  

Conclusion

For small businesses, the 2025–26 Federal Budget offers a mix of support and uncertainty. While the extension of energy bill relief and increased funding to regulators aim to reduce operational pressures and promote fairer business practices, the lack of progress on legislating the $20,000 instant asset write-off creates ongoing challenges for investment and planning.

Additionally, increased ATO compliance funding signals heightened scrutiny ahead, making it more important than ever to ensure your records and tax positions are in order. Overall, this is a budget that aims to ease cost pressures, but with limited new measures, many small businesses may still feel left waiting for clearer, longer-term support.

If you’d like to understand what this means for your business, please reach out to your Client Manager.