Tonight, the Albanese government released its federal budget for the 2025/26 financial year. Assuming the government is re-elected before the end of May 2025, here’s my clear and concise breakdown of the key announcements:
Income tax cuts
From 1 July 2026, the income tax rate on earnings between $18,201 and $45,000 will reduce by 1%, dropping from 16% to 15%. This will save taxpayers approximately $268 annually. Another 1% reduction will occur on 1 July 2027, doubling the total annual saving to around $536.
Medicare levy threshold increase
If your taxable income is below a certain level, you don’t need to pay the 2% Medicare levy. Effective immediately, these thresholds have been increased:
- Singles: from $26,000 to $27,222
- Families: from $43,846 to $45,907
- Single seniors and pensioners: from $41,089 to $43,020
- Senior and pensioner families: from $57,198 to $59,886
Cheaper medications
From 1 July 2026, the maximum amount patients pay for government-subsidised medications will decrease from $31.60 to $25.00 per prescription.
Extended electricity bill rebate
The existing electricity rebate of $75 per quarter, originally set to expire on 30 June 2025, has been extended until the end of December 2025. This rebate is not means-tested, making it available to all households and businesses.
20% reduction in student debt
On 1 June 2025, the government plans to automatically cut HELP and student loan balances by 20%, provided this legislation passes parliament on time. Additionally, the minimum repayment threshold for these loans will rise significantly, from $54,435 in 2024-25 to $67,000 in 2025-26.
Increased funding for shared equity housing scheme
The “Help to Buy” shared equity housing scheme will receive an additional $800 million. This extra funding expands eligibility by raising the maximum allowable purchase price and income thresholds. Although announced in 2022, the scheme’s start date remains uncertain, as legislation was only recently passed.
30% tax on super balances above $3 million
The proposed Division 296 tax, applying a flat 30% rate to income, capital gains, and unrealised gains on superannuation balances exceeding $3 million, is still pending. Although it passed the House of Representatives, it stalled in the Senate. Originally intended to start on 1 July 2025, the delays now make a start date of 1 July 2026 more realistic if this government is re-elected, and the final form of the law still remains uncertain.
Government debt set to exceed $1.2 trillion
The budget deficit for FY26 is projected to increase significantly by over 50%, reaching $42.1 billion.
However, the real story is somewhat obscured by substantial “off-budget” spending, as highlighted by economist, Chris Richardson. Consequently, total government debt is expected to surpass $1 trillion by mid-2026 and climb beyond $1.2 trillion by mid-2029.
No major planning opportunities
From a financial planning perspective, tonight’s budget doesn’t introduce any significant opportunities. Thankfully, individual-focused measures won’t likely affect consumer spending materially, indicating minimal impact on inflation.
