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Insights from the 2025-26 Federal Budget
With Treasurer Jim Chalmers’ fourth budget of this parliamentary term having been delivered a matter of weeks before the next federal election, its focus on cost of living relief for individuals was not surprising, although many may have expected greater investment in building economic resilience amidst global uncertainty.
For the budget that was never meant to be it did deliver at least one surprise, being minor personal tax cuts!
Headline measures from a cost of living perspective included:
Personal income tax cuts for all Australian taxpayers
Minor reductions of up to $10 per week through an aggregate two percentage point decrease to the rate applicable to the lowest tax bracket starting 1 July 2026.
Increased Medicare levy low-income thresholds
Adjustments to various thresholds to ensure low-income individuals continue to be exempt from the Medicare levy or pay a reduced levy rate.
Further energy bill relief
Extension of the Energy Bill Relief Fund until the end of 2025, providing all households and eligible businesses with an additional $150 in rebates.
Record investment in bulk billing
Allocation of $7.9 billion over four years (and $2.4 billion per annum thereafter) to expand bulk billing incentive eligibility to cover all Australians and establish the Bulk Billing Practice Incentive Program, encouraging general practices to exclusively bulk bill.
Student debt relief
a one-time reduction of 20% to all outstanding Higher Education Loan Program and other student debts, eliminating $16 billion from the student loan accounts of three million Australians
A $25 cap on Pharmaceutical Benefits Scheme medicine
The 2025-26 Federal Budget also saw the commitment of $5bn towards the development of a universal early childhood education and care system, various incentives to encourage investment in priority areas such as clean energy and green metals, and a raft of measures to deliver the Federal Government’s ambitious National Housing Accord.
Although the nation’s forecast fiscal position is marginally improved from the 2024-25 Mid-Year Economic and Fiscal Outlook, the various spending initiatives announced will put pressure on the Federal coffers, with successive budget deficits (commencing with $44.2bn for 2025-26, with a shortfall of $27.6bn this fiscal year) forecast across the forward estimates period.
Somewhat surprisingly, the 2025-26 Federal Budget was devoid of any novel tax collection measures. However, it did see close to $1bn of additional funding for the Australian Taxation Office to ‘extend and expand tax compliance activities’, which is welcome.
This additional funding, which will be primarily dedicated to expanding and extending the Tax Avoidance Taskforce, is forecast to yield increased tax receipts in excess of $3bn.
All in all, a politically shrewd pre-election budget that will surely generate headlines, but as anticipated lacks the wholesale, structural reforms that many sectors are seeking.
