2025 Federal Budget
As widely expected, the 2025 Federal Budget primarily targets voters on the eve of an election.
The provision of tax cuts and many cost-of-living relief measures were surprising and will be financed through debt rather than windfall gains from economic or productivity gains. While they may provide temporary relief, they do not provide true tax reform which addresses deeper structural issues.
Following two consecutive surpluses, the 2024-25 budget is in deficit to $27.6 billion, growing to $42.1 billion in 2025-26. Gross debt balloons to $1.22 trillion by the end of 2028-29.
Inflation is expected to be 2.5% through to June 2025 and hit 3% in 2025-26 but sustainably return to the RBA's target band of 2-3% around the middle of 2025. Unemployment is now projected to peak lower at 4.25%.
Below are key matters that may impact clients of Lorica Partners. Note many of these announcements are likely subject to the pending election outcome.
Individuals
Tax Cuts - Under the Government’s new tax cuts, from 1 July 2026 the 16% rate ($18,201 - $45,000) will be reduced to 15%, with a further 1% reduction to 14% from 1 July 2027. Each 1% tax cut for this bracket equates to $268 per annum. The proposed changes are shown below:
Energy Bill Relief - energy bill rebates of $75 per quarter for eligible Australian households and small businesses until 31 December 2025, so effectively $150 in total. The rebates will automatically apply to your bills.
HECS debts – a one-off 20% reduction to HECS (now called HELP) or student loan debt before indexation is next applied on 1 June 2025. The government will also increase the minimum repayment threshold for HELP and student loan debts from $54,435 in 2024-25 to $67,000 in 2025-26. HELP repayments will now be calculated only on the income above the new $67,000 threshold, rather than repayments being based on total annual income.
Restrict foreign ownership of housing - As previously announced on 16 February 2025, foreign persons (including temporary residents and foreign-owned companies) will be temporarily banned from 1 April 2025 for two years from purchasing established dwellings in Australia, 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.
Deferral of foreign resident capital gains tax measure - The government will defer the start date of the previously announced measure to broaden foreign resident capital gains taxation (announced in the 2024-25 Budget), from 1 July 2025 to at least 1 October 2025.
Superannuation
No new measures announced.
Superannuation guarantee – no change to current legislation for the rate to increase from 11.5% to 12% from 1 July 2025. This is the final increase to the Superannuation Guarantee rate based on previous legislation.
Transfer Balance Cap increase – from 1 July 2025, the lifetime limit on the amount you can transfer into a tax-free pension will increase from $1.9 million to $2.0 million. This limit is regularly indexed and, in the years ahead, will likely increase by $100,000 almost annually.
30% tax on $3 million+ individual account balances (Division 296 Tax) – the Budget was silent on the previously announced legislation to reduce the tax concessions available to individuals with a total superannuation balance exceeding $3 million from 1 July 2025. The Bill (still with the Senate) will lapse once the Prime Minister calls the Federal election, unless they are passed beforehand when Parliament resumes for the Budget sittings on 25-27 March. The consensus is the legislation will not pass.
Business
Asset write offs - no further extension to the small business $20,000 instant asset write off was announced. Last year’s extension to 30 June 2025 is yet to be legislated. At present, the instant asset write off will revert to its $1,000 limit from 1 July 2025.
Non-compete clauses - The government will ban non-compete clauses that apply to workers earning less than $175,000 and will introduce other measures targeting anticompetitive practices. The announcement is light on detail, but the government will consult on the policy, including exemptions, penalties, and transition arrangements. Following consultation and passage of legislation, the reforms will take effect from 2027.
This legislation has been spurred by the Treasury's Competition Review which heard troubling accounts regarding the misuse of non-compete clauses, including minimum wage workers being sued by former employers. The Government will also close loopholes in competition law that allow businesses to fix wages by making anti-competitive arrangements that cap workers' pay and conditions, without the knowledge and agreement of affected workers.
Payday superannuation to proceed - from 1 July 2026, employers will be required to align payment of an employee’s Superannuation Guarantee contribution within seven days of paying the employee’s salary and wages. These measures were first announced in the 2023-24 Federal Budget and remove the current quarterly due dates. The measure has bipartisan support.
Apprenticeships - The government will provide $722.8m over 4 years from 2025-26 to deliver increased support for apprentices. Funding includes $626.9m over 4 years from 2025-26 to reframe the New Energy Apprenticeships Program as the Key Apprenticeship Program and expand it to capture critical residential construction occupations.
Other
Medicare - additional funding of $8.4 billion over five years from 2024-25 to increase access to bulk billing by expanding eligibility for bulk billing incentives for general practices if they bulk bill every visit under Medicare.
Cheaper medicine – provide $784.6 million over four years from 2025–26 to lower the Pharmaceutical Benefits Scheme (PBS) general patient co-payment from $31.60 to $25.00 on 1 January 2026.
Infrastructure - $15.6 billion in new investments predominantly in road and rail projects across all states and territories. The $7.2 billion for the Bruce Highway upgrade will delight Queensland clients as it is long overdue.
Immigration – Net Overseas Migration (NOM) is forecast to be 225,000 in 2027–28 and 2028–29, so pressure on housing supply continues.
Pacific region - continues to be a priority for the government, with $164.6 million over four years to support growth in the Royal Solomon Islands Police Force. This investment will assist in building Solomon Islands’ ability to meet its security needs and, importantly, attempt to re-assert Australia’s position as the security partner of choice in our near region.
Beer excise - indexation frozen for 2 years. Rejoice!
Author: Rick Walker