Self-managed Superannuation Funds

On Tuesday, 25 March 2025, Treasurer Jim Chalmers handed down the 2025-26 Federal Budget, his 4th Budget.

The major personal tax-related measures announced in the Budget include the following.

Personal tax rates cut from 1 July 2026 and 2027

The Government has proposed to cut the personal income tax rate for the income threshold ($18,200 - $45,000) from 16% to 15% (from 1 July 2026) and 14% (from 1 July 2027).

Under the proposed changes, every Australian taxpayer will receive a tax cut of up to $268 from 1 July 2026, rising to $536 from 1 July 2027.

The Government said the proposed tax cuts will provide "modest but meaningful" cost-of-living relief and "return bracket creep" by lowering average tax rates for all taxpayers, especially for low- and middle-income earners.

Example

Isha and Cameron have 2 children and are working full-time. Isha is a registered nurse and Cameron is a truck driver, both earning $80,000 per year. Under the Government's proposed tax cuts, Isha and Cameron will collectively pay $536 less tax in 2026-27, and $1,072 less in 2027-28. Combined with the existing Stage 3 tax cuts, Isha and Cameron will collectively pay $4,430 less tax in 2027-28 (compared to the 2023-24 tax settings).

The Government's proposal to reduce the resident income tax rates is not expected to flow through and impact the income tax rates for foreign residents. This is because foreign residents are not entitled to the tax-free threshold or the first income tax threshold.

No changes were made to the low income tax offset (LITO) in the 2025-26 Budget. The maximum amount of the LITO is $700. The maximum LITO reduces at a rate of 5 cents per dollar for taxable income above $37,500 and reduces at a rate of 1.5 cents per dollar for taxable income above $45,000 and is not payable for taxable income of $66,667 or more.

Medicare levy low-income thresholds for 2024-25

For the 2024-25 income year, the Medicare levy low-income threshold for singles has been increased to $27,222 for 2024-25 (up from $26,000 for 2023-24). For couples with no children, the family income threshold is $45,907 (up from $43,846 for 2023-24). The additional amount of threshold for each dependent child or student is $4,216 (up from $4,027).

For single seniors and pensioners eligible for the SAPTO, the Medicare levy low-income threshold is $43,020 (up from $41,089). The family threshold for seniors and pensioners is $59,886 (up from $57,198), plus $4,216 for each dependent child or student.

The increased thresholds will apply to the 2024-25 and later income years. Note that legislation is required to amend the thresholds.

Energy bill rebate to be extended: extra $150 for 2025

The Government will extend its energy bill rebate until the end of 2025 by providing a further 2 instalments of $75 for households and small businesses.

From 1 July 2025, Mr Albanese said households and around one million small businesses will see another $150 in rebates "automatically applied to their electricity bills in quarterly instalments, on top of the previous rebates already being rolled out".

Help To Buy home scheme expanded

The Government will increase its equity investment in the Help to Buy scheme to $6.3bn (up $800m), and increase the income and price caps.

Under this shared equity loan scheme, the Commonwealth will provide an equity contribution up to 40% of the purchase price to assist up to 40,000 eligible first home buyers to purchase a new or existing home.

The Government said it will increase the scheme's income cap from $90,000 to $100,000 for individuals, and from $120,000 to $160,000 for joint applicants and single parents.

The property price caps for eligible homes will also be increased and linked with the average house price in each State and Territory, not dwelling price, so first home buyers have more choice. For example, the NSW capital city and regional centre price cap will be set at $1.3m (rather than at the median house price of approximately $1.5m) to ensure purchase prices remain within the borrowing capacity of first-home buyers. The cap will be $800,000 for NSW (outside the capital city and regional centres).

The Minister for Housing, Claire O'Neil, said first home buyers on average rates with a $519,000 home will save about $900 per month when buying an existing home, and $1,200 per month when buying a new home.

Commonwealth legislation to establish the Help to Buy program was enacted on 10 December 2024 but the scheme will not commence until the Program Directions are in force. Ms O'Neil said the Help to Buy scheme will be open for applications later in 2025, following registration of the Program Directions, passage of State legislation, and implementation by Housing Australia.

Early childhood education: child care subsidy

The Government will provide $4.5m over 4 years from 2025-26 to Services Australia to make system changes to ensure consistency with the passing of recent legislation to implement the Child Care Subsidy Three Day Guarantee. According to the Government, this will ensure families are entitled to at least 3 days a week of subsidised early childhood education and care.
The Child Care Subsidy Three Day Guarantee will replace the Child Care Subsidy activity test from January 2026.

Beer excise indexation frozen for 2 years

The Government will pause indexation on draught beer excise and excise equivalent customs duty rates for a 2-year period, from August 2025. Under this measure 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.

Foreign ownership of housing: ATO to enforce ban

The Government has already announced the ban on foreign persons (including temporary residents and foreign-owned companies) from purchasing established dwellings for 2 years from 1 April 2025, unless an exception applies. 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.

The land banking measures are designed to ensure "foreign investors comply with requirements to put vacant land to use for residential and commercial developments within reasonable timeframes". Land banking refers to the practice of entities purchasing land and holding it until such time as its value has increased and then selling, ie with no development or use of the land.

Reduction of HELP debts

As previously announced, Government has confirmed in the Budget that it will make changes that will reduce Higher Education Loan Program (HELP) and other student debts for more than 3 million Australians by around $19bn. The measure will reduce outstanding student debts by 20% before indexation is applied on 1 June 2025 - subject to the passage of legislation - which will remove $16bn in debt.

The Government has also confirmed it will reform the repayment system for the HELP and other student loan schemes. The reform will deliver a fairer student loan repayment system that is based on marginal rates and will increase the amount individuals can earn before they are required to start repaying their loan. It will take effect from 1 July 2025, subject to the passage of legislation.

The Government has already legislated a cap on HELP indexation based on the lower of the Consumer Price Index or the Wage Price Index. The change was backdated to 1 June 2023, and has already reduced outstanding student debt by around $3bn, according to the Government.