Federal Budget 2025-26

Cost of living was the primary focus of the 2025-26 Federal Budget. In particular, tax rate reduction, energy bill relief, student debt waivers, child care assistance, increased Medicare funding, PBS cost reductions, and freezing of deeming rates for retirees

Reduction in the price of iron ore, coal, liquified natural gas, and critical minerals have all had an impact upon Federal Government taxation revenue.

Australia will likely lift defence spending to 2.3 per cent of GDP, from its current 2 per cent of GDP (which is still well behind USA’s 3.4 per cent of GDP).

Net overseas migration to Australia was 435,000 for the 2023-2024, following a similar 535,000 in 2022-2023 (ABS – Overseas Migration – 13/12/2024), and is forecast to be 335,000 for 2024-2025; 260,000 for 2025-2026; and 225,000 in 2026-27, 2027–28 and 2028–29 .

The budget did include consideration of the global economy and the uncertainty and volatility facing global markets. However, The Australian economy showed growth at the end of last year and the recover is expected to continue into 2026 – 2027.  

Budget bottom line

• 2024-2025 deficit of -1.0% of GDP, or -$27.6 billion.  With predicted deficits of: -$42.1 billion for 2025-26; -$35.7 billion for 2026-27; -$37.2 billion for 2027-28.
• Gross domestic debt will be $940 billion in 2024-2025. With predicted debt of: $1.022 trillion in 2025-26; $1.092 trillion in 2026-27; and $1.161 trillion in 2027-28.
• Unemployment is at 4.1% (February 2025) and expected to remain below 4.25% over the mid-term.
• The increasing risk of a global trade war will see some reduction in forecasts for global and Australian economic growth. The OECD has lowered its forecasts for global growth and indicated the international outlook is highly uncertain.
• Annual real wages are forecast to grow by ½ percent.
• Wages growth (WPI) is currently at 3.2% (December 2024 – ABS).
• Global uncertainty, persistent cost of living pressures, slowing growth will all have adverse effects on the budget.
• Iron ore prices have fallen to $US 104 a tonne (at 24 March 2025).
• Australian population is now at 27.8 million (as at December 2024).
• 14.5 million Australians in work. Unemployment rate of 4.0% (as at February 2025).
• CPI was 2.4% for the 12 months to 31 December 2024 (down from 2.8% in the 12 months to 30 September 2024), but still outside the RBA target rate of 2-3%.
• RBA Cash Rate is currently at 4.10% (last change on 19 February 2025).
• Cut to marginal tax rate over two years bringing it to the lowest level in over 50 years.

Increase in the Medicare levy low‑income thresholds from 1 July 2024

Personal Income Tax

• The stage-three tax cuts which came into effect on 1 July 2024 for Australian residents remain unchanged for 2025-2026 financial year, but further improvements will occur for both the 2026-27 & 2027-28 financial years.
• Company tax rates to remain at 25% for small businesses, 30% for all others.

This table does not include the Medicare levy.

• This will result in a tax savings of $268 per annum in 2026-27, and  $536 per annum in 2027-28.

Deeming rates frozen

• In previous Budgets, any freeze or change in the deeming rates were specifically mentioned.  This year they were not specifically mentioned in the Budget papers.  The deeming rates remain frozen for another 12 months, although this may be changed by the Minister of Social Services at any time.
• Deeming rates for 900,000 pensioners will be frozen for another year.
• Deeming rates impact means testing for Centrelink payments like the pension, which can be cut depending on financial assets like shares, superannuation and bank account balances.
• These rates have remained steady each year from 1 May 2020, while the thresholds have increased with indexation each year.
• The deeming rates are 0.25% (low rate) and 2.25% (high rate) and the deeming thresholds are $62,600 (single) and $103,800 (Couple- combined).

Key Superannuation Rates and Thresholds

Disaster Recovery

• The Government has provisioned an additional $1.2 billion to recovery relief to better respond to future disasters.

HELP Student debt relief:

• Student loan debt will be slashed by 20% for about 3 million Australians on 1 June 2025.
• The $16 billion plan will effect 3 million Australians and be in addition to the previous reforms to reduce the impact of indexation.
• The one-off discount represents a massive student debt reduction – more than five times larger than last year's move to retrospectively lower the indexation applied to those debts.
• Subject to legislation passing, the threshold for making payments will increase from $54,435 in 2024–25 to $67,000 in 2025–26.
  
• No one will pay more under the new system, and compulsory repayments will be lower for people earning under around $180,000 and above the current minimum threshold.
• A person carrying the average $27,000 debt will see a $5,400 reduction.

Subsidised childcare:

• $427 million over five years allocated to the new 3 Day Guarantee which replaces the Child Care Subsidy (CCS).
• From 5 January 2026 under the 3 Day Guarantee all CCS eligible families will get 3 days subsidised care each week for each child.
• Families caring for First Nations children will get 100 hours of subsidised care each fortnight for each child.
• Families earning more than $533,280 will not be eligible.

Energy – Cost of Living

• Energy bill relief to be extended to the end of 2025.
• The $300 energy rebate was set to end on 1 April 2025, but there is a $1.8 billion extension..
• The current rebate program automatically credited $75 to the energy bills of households and small businesses each quarter.
• Under the extension, two more quarterly instalments will be paid from 1 July 2025 to take the relief through the end of the calendar year.
• This will reduce CPI inflation by approximately 0.6%.
• The Australian Competition and Consumer Commission’s (ACCC) Inquiry into the national electricity market will also be extended by another 12 months.

Health

• $7.9 billion over four years from 2025 – 2026 (and $2.6 billion per year ongoing) to increase access to Medicare bulk billing incentive for Australians general practitioners.  Goal is to make nine out of every 10 GP visits free by the 2030. This will mean 15 million more GP visits are eligible to be bulk-billed each year.
• Fully bulk-billed practices will be 4,800 nationally by 2028-29.
• States will share a $1.8 billion public hospital and health services funding increase in 2025 - 2026.
• Another $657.9 million over three years from 2025 - 2026 will go towards opening 50 new Medicare urgent care clinics. This will increase the number of clinics to 137 nationally.
• The Pharmaceutical Benefits Scheme (PBS) will receive another $784.6  million over four years from 2025 / 2026 (and $236.4 million per year ongoing) to lower the PBS general patient co=payment from $31.60 to $25.
• From 1 November 2025, GP Clinics will receive a 12.5% bonus where they all bulk-bill.

Pharmaceutical Benefits Scheme (PBS)

• The Government will provide $1.8 billion over five years from 2024–25 for new and amended listings on the Pharmaceutical Benefits Scheme (PBS), Repatriation Pharmaceutical Benefits Scheme, Stoma Appliance Scheme and Take Home Naloxone program. Examples of new and amended PBS listings since the 2024–25 MYEFO include:
  • olaparib (Lynparza®), from 1 January 2025, for treatment of patients with human epidermal growth factor receptor type 2‑negative metastatic breast cancer.
  • talazoparib (Talzenna®), from 1 January 2025, for treatment of patients with prostate cancer who have the BRCA1 or BRCA2 mutations.
  • selpercatinib (Retevmo®), from 1 February 2025, for treatment of advanced or metastatic non‑small cell lung cancer.
  • estradiol and progesterone (micronised) co-pack (Estrogel Pro®), estradiol (Estrogel®) and progesterone (Prometrium®) from 1 March 2025, as menopausal hormone therapy for estrogen deficiency symptoms in postmenopausal women, the first PBS listings for new types of menopausal hormone therapy in more than 20 years.
  • drospirenone with ethinylestradiol (Yaz® and Yasmin®), from 1 May 2025, the first PBS listing for new oral contraceptives in more than 30 years.
  • epcoritamab (Epkinly®), from 1 May 2025, for treatment of patients with relapsed or refractory diffuse large B‑cell lymphoma.
  • esketamine nasal spray (Spravato®), from 1 May 2025, for treatment‑resistant major depression.
  • relugolix with estradiol and with norethisterone acetate (Ryeqo®), from 1 May 2025, for treatment of patients with moderate to severe pain associated with endometriosis.

Incentives to attract and retain more Doctors and Nurses

The Government will provide $662.6 million over five years from 2024–25 (and $230.9 million per year ongoing) to continue to strengthen and support Australia’s health workforce. Funding includes:

• $606.3 million over four years from 2025–26 (and $226.3 million per year ongoing) todeliver more Australian doctors and nurses. Funding includes:
  • $265.4 million over four years from 2025–26 (and $94.8 million per year ongoing) to expand general practitioner (GP) training through the Australian General Practice Training Program and the Remote Vocational Training Scheme to deliver 200 new general practitioner training places each year from 2026, increasing to 400 from 2028.
  • $248.7 million over four years from 2025–26 (and $83.6 million per year ongoing) for salary incentives for junior doctors to specialise in general practice, and to provide paid parental leave and study leave for trainee GPs.
  • $45.0 million over four years from 2025–26 (and $29.9 million per year ongoing) for 100 new medical Commonwealth Supported Places per year from 2026, increasing to 150 per year from 2028.
  • $44.0 million over four years from 2025–26 (and $16.0 million per year ongoing) for 200 new junior doctor/internship rotations in primary care per year from 2026 increasing to 400 per year from 2028.
  • $3.2 million over four years from 2025–26 (and $2.0 million per year ongoing) to uncap the number of medical Commonwealth Supported Places for First Nations students from 2026.
  • $10.5 million over two years from 2025–26 to expand the Primary Care Nursing and Midwifery Scholarship Program to deliver an additional 100 graduate certificate/diploma scholarships and 100 masters scholarships per year to support nurses and midwives to undertake post‑graduate study.
• $1.3 million over two years from 2024–25 to extend the Obstetrics and Gynaecology Education and Training Program by 12 months to provide training for a range of medical professionals who assist in the provision of maternity or maternity‑related services.
• $28.0 million over three years from 2025–26 to support the construction of the Nursing and Midwifery Academy in Victoria, to be operated by the Epworth Medical Foundation.
• $16.5 million over five years from 2024–25 (and $4.6 million per year ongoing) for the costs associated with updates to the Modified Monash Model and Distribution Priority Area classification systems to reflect the latest Australian Bureau of Statistics Census data, and workforce data from the Department of Health and Aged Care.

Women’s Health

The Government will provide $240.4 million over five years from 2024–25 (and $42.3 million per year ongoing) to support women’s health. Funding includes:

• $134.3 million over four years from 2025–26 (and $35.3 million per year ongoing) to increase the schedule fee for four long‑acting reversible contraception (LARC) items on the Medicare Benefits Schedule (MBS), and to incentivise bulk billing through the creation of an MBS item claimable when a provider bulk bills a LARC insertion or removal service.
• $26.3 million over three years from 2025–26 for a health assessment item on the MBS for women of all ages experiencing perimenopause and menopause.
• $25.6 million over four years from 2025–26 (and $7.0 million per year ongoing) to establish eight LARC Centres of Training Excellence to provide LARC services and training to health professionals.
• $20.9 million over three years from 2025–26 to support 33 Endometriosis and Pelvic Pain Clinics to provide specialist care and support for women experiencing endometriosis, pelvic pain, perimenopause and menopause.
• $12.8 million over two years from 2025–26 for a public campaign to raise awareness of perimenopause and menopause symptoms, and management options.
• $10.0 million over four years from 2025–26 to the New South Wales Government to support the provision of public maternity services for women and babies in the Central Coast region of New South Wales.
• $6.0 million over two years from 2024–25 to the Tasmanian Government to improve access to maternity services in Hobart and the surrounding regions.
• $4.4 million over three years from 2025–26 to develop national clinical guidelines for perimenopause and menopause, and to deliver professional development courses for health professionals specialising in perimenopause and menopause.

Aged care and child care workers

• $2.6 billion for further pay rises for aged care nurses from 1 March 2025.
• $3.6 billion to support a historic wage increase for the early childhood education and care workforce.
• This is delivering a 10 per cent increase relative to modern award rates from December 2024 and will provide a further 5 per cent from December 2025.

Funding Pay Increases for Aged Care Workers – nurses

• The Government will provide $88.3 million over five years from 2024–25 (and $0.9 million per year ongoing) to fund the outcome of the Fair Work Commission’s decision to increase the minimum award wages of registered and enrolled nurses employed in the aged care sector.

Digital Mental Health

• Government will provide additional funding of $46.0 million over four years from 2024–25 to continue digital mental health services.

Building Australia’s Future – Australian Made Metals

The Government will provide $3.2 billion over 19 years from 2024–25 to invest in the future of Australia’s metals industry. Funding includes:

• $2.0 billion over 19 years from 2024–25 for Green Aluminium Production Credits to provide production based grants to support Australian aluminium smelters switching to renewable electricity before 2036. This would be provided to eligible Australian Aluminium production facilities over a period of 10 years.
• $1.0 billion over seven years from 2024–25 for the Green Iron Investment Fund to fund green iron projects through capital grants to support producers to establish or transition into low emissions facilities in Australia, including up to $500 million earmarked to transform the Whyalla Steelworks. The funding profile for this measure is not for publication (nfp) due to commercial sensitivities.
• $219.3 million over two years from 2024–25 to provide immediate on the ground support and to stabilise the Whyalla Steelworks during administration. Funding includes:
  • $192.0 million over two years from 2024–25 as the Commonwealth’s co‑contribution to South Australia for the administration costs of the Whyalla Steelworks.
  • $18.0 million over two years from 2024–25 as the Commonwealth’s support for creditor assistance payments for eligible businesses.
  • $9.3 million over two years from 2024–25 to support a joint taskforce with the South Australian Government through the provision of independent insolvency, legal, commercial and probity advice and to facilitate negotiations.

Foreign Property Ownership

• A raft of measures to support the Government’s agenda to boost Australia’s housing supp;y were announced including a 2 year ban on the purchase of established dwellings by foreign buyers from 1 April 2025.

Helping more Aussies secure a home

• The government's Help to Buy scheme, which assists Aussies getting into the property market, will be expanded by $800 million, so it includes people with higher incomes and applies to more expensive homes.
• The scheme allows Aussies to buy a home, with the government contributing up to 40 percent of the property price through a shared equity loan.
• The income limit will increase from $90,000 to $100,000 for singles, and from $120,000 to $160,000 for joint applicants and single parents.
• The property price caps will also be expanded. For example, in Sydney, you can't purchase a home more expensive than $950,000 under the current rules, however that will increase to $1.3 million.
• The scheme will assist approximately 40,000 eligible households over the next four years to buy a house.

Apprentices

• Close to $630 million will be allocated to the Key Apprentice Program to keep tradies-in-training progressing through their apprenticeships.
• Eligible tradies will be given $10,000 during their training.
• They will receive $10,000 over five $2,000 instalments at six, 12, 24 and 36-month intervals.  They'll also get a final $2,000 upon completion of the program.
• This program will commence on 1 July 2025.

Government Contracts

• Close to $720m in savings will be achieved in 2028/2029 by further cuts to the external worker budgets of government departments.
• $4.7bn has been saved since 2022 / 2023 through cuts to contractor budgets in an effort to build up skills within the public service.

Small Business Asset Write Off

• The Government will cease the $20,000 instant asset write off on 30 June 2025. Small businesses with annual turnover of less than $10 million will continue to be able to deduct eligible assets costing less than $20,000 until 1 July 2025.

Hospitality and Alcohol Producers

• Biannual indexation of draught beer excise and excise equivalent customs duty rates due to occur in August 2025, February 2026, August 2026, and February 2027 will not occur. Biannual indexation will then recommence from August 2027.
• All eligible wine producers can currently receive a Wine Equalisation Tax rebate up to a cap of $350,000 under the Producer rebate. This measure will increase the caps for all eligible brewers, distillers and wine producers to $400,000 per financial year, from 1 July 2026.

First Nations Funding

• The Government will provide $506.4 million over five years from 2024–25 (and an additional $12.3 million in 2029–30) to achieve better outcomes for First Nations people under the National Agreement on Closing the Gap.

Tobacco Enforcement

• $156.7 million over two years from 2025–26 to strengthen compliance and enforcement action in relation to the trade of illicit tobacco and nicotine products

Education Funding

• $407.5 million over four years from 2025–26 (and $7.2 billion from 2029–30 to 2035–36) to jurisdictions which have signed Better and Fairer Schools Agreement (Full and Fair Funding 2025–2034) Bilateral Agreements, including New South Wales, South Australia, Tasmania and the Australian Capital Territory. The agreement sees the Commonwealth increase its share of the Schooling Resource Standard to 25 per cent by 2034–35, putting schools on a path to full and fair funding.

Infrastructure

The Government will provide $17.1 billion over ten years from 2024–25 for road and rail infrastructure priorities to support productivity and jobs. Funding includes:

• $7.2 billion for safety upgrades on the Bruce Highway in Queensland.
• $2.0 billion to upgrade Sunshine Station and $1.0 billion for the Road Blitz in Victoria.
• $2.8 billion for projects in New South Wales, including $115.0 million to upgrade Terrigal Drive and the following projects in Western Sydney: $1.0 billion to preserve the corridor for the South West Sydney Rail Extension, $580.0 million for upgrades to Townson Road, Burdekin Road and Garfield Road West to support housing growth and flood resilience and $500.0 million to upgrade Fifteenth Avenue.
• $350.0 million to upgrade the Kwinana Freeway in Western Australia.
• $200.0 million for upgrades to the Arthur Highway and $80.0 million for the Southern Outlet Transit Lane Extension in Tasmania.
• $200.0 million for the duplication of the Stuart Highway (Darwin to Katherine) in the Northern Territory.
• $125.0 million for the Curtis Road Level Crossing Removal in South Australia.
• $20.0 million for Monaro Highway Upgrade Stage 2 planning works in the Australian Capital Territory.
• $1.5 billion over eight years from 2024–25 for existing Infrastructure Investment Program projects or corridors, including:
  • $1.1 billion for the Western Freeway in Victoria.
  • $200.0 million for the Rockhampton Ring Road in Queensland.
  • $50.0 million for Homebush Bay Drive in New South Wales.
  • $30.0 million for the Monaro Highway Upgrade in the Australian Capital Territory.
  • The Government will also provide $12.0 million over two years from 2025–26 for the Port Augusta Wharf Refurbishment.

NBN Fibre Upgrades

• The Government will provide an equity investment of up to $3.0 billion over seven years from 2024–25 to NBN Co to upgrade the remaining 622,000 National Broadband Network (NBN) premises on the national fibre‑to‑the‑node (FTTN) network with NBN Co also contributing more than $800 million to the project.

Tax Practitioners Board

• The Tax Practitioner Board is being beefed-up from 1 July 2025, with additional focus on tax practitioner compliance. The government expects this to increase tax receipts by $47 million.

ATO Monitoring and Compliance

• $717 million additional funding to the Tax Avoidance Taskforce is amongst a suite of spends to better enable the ATO to clamp down on tax avoidance.

ASIC

• ASIC will receive $207 million to spend on updating its business registers.

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