The 2025–26 Federal Budget, handed down by Federal Treasurer Dr. Jim Chalmers on 25 March 2025, was delivered under the banner of “a new generation of prosperity in a new world of uncertainty.” As the final budget before the expected federal election, it places a strong focus on easing cost-of-living pressures, increasing housing supply, and investing in education, while continuing to support economic stability in a volatile global environment.
At the heart of the Budget are new personal income tax cuts that will benefit all Australian taxpayers. The marginal tax rate for incomes between $18,201 and $45,000 will reduce from 16% to 15% from 1 July 2026, and further to 14% from 1 July 2027 — delivering meaningful relief particularly for low and middle-income earners.
From 1 July 2024, the Medicare levy low-income thresholds will increase for singles, families, and seniors. This measure aims to shield low-income earners from additional tax burdens amid persistent inflationary pressures.
The Budget also announces a 20% reduction in all outstanding Higher Education Loan Program (HELP) and other student debts, effective before indexation on 1 June 2025. From 1 July 2025, student loan repayments will shift to a marginal repayment system, with a higher minimum threshold of $67,000 — up from $54,435.
To improve housing availability, the government will introduce a two-year ban — starting 1 April 2025 — on foreign purchases of existing dwellings, alongside increased enforcement funding for the ATO and Treasury to monitor compliance and deter land banking by foreign investors.
In the realm of tax administration, nearly $1 billion in funding will be allocated over four years to boost the ATO’s compliance programs. These include extending the Tax Avoidance Taskforce, tackling the shadow economy, and enhancing personal income tax compliance efforts.
The Budget also introduces changes to Managed Investment Trust (MIT) rules, ensuring that widely-held foreign investors remain eligible for concessional tax treatment.
For not-for-profits, the list of Deductible Gift Recipients (DGRs) will be updated to include several new organisations, supporting a range of charitable causes across Australia.
In indirect tax changes, the government will freeze indexation on draught beer excise for two years from August 2025, and increase the excise remission cap and Wine Equalisation Tax producer rebate from $350,000 to $400,000 from 1 July 2026.
Although no new tax measures have been introduced for small businesses or superannuation, the 2025–26 Budget reinforces the government’s fiscal strategy to balance responsible economic management with targeted support for households, education, and housing.
Our Summary
Individual
- Personal income tax cuts proposed
- Medicare levy low-income thresholds to be increased
- Higher education loan repayment changes
- Start date deferred for measure to strengthen foreign resident CGT regime
- Restrictions on foreign ownership of housing
Tax administration
Not-for-profits
Indirect taxes
Individual
Personal income tax cuts proposed
The marginal tax rate for the personal income tax threshold bracket from $18,201 to $45,000 will be reduced from 16% to 15% from 1 July 2026, and further reduced to 14% from 1 July 2027.
The applicable marginal tax rates and income thresholds for recent income years, as well as the proposed new rates, are depicted in the table below.
Personal income tax rates and thresholds
| Threshold ($) | 2024–25 and 2025–26 (%) | 2026–27 (%) | 2027–28 (%) |
| 0–18,200 | 0 | 0 | 0 |
| 18,201–45,000 | 16 | 15 | 14 |
| 45,001–135,000 | 30 | 30 | 30 |
| 135,001–190,000 | 37 | 37 | 37 |
| >190,000 | 45 | 45 | 45 |
Source: Budget Paper No 2, p 5; Budget Factsheet — New tax cuts for every Australian taxpayer, p 1; Prime Minister and Treasurer, “New cost of living tax cuts under Labor” [joint media release], 25 March 2025.
Medicare levy low-income thresholds to be increased
The Medicare levy low‑income thresholds for singles, families, and seniors and pensioners will be increased from 1 July 2024.
The applicable thresholds for 2023–24 and 2024–25 are depicted in the tables below.
Medicare levy low-income thresholds 2023–24
| Low-income threshold (above which levy begins to phase in) | Full Medicare levy (2%) applies above* | |
| Singles | $26,000 | $32,500 |
| Single Seniors and Pensioners | $41,089 | $51,361 |
| Families (not eligible for Seniors and Pensioner Tax Offset) | $43,846 (plus $4,027 for each dependent child) | $54,807 (plus $5,034 for each dependent child) |
| Families (Senior and Pensioner) | $57,198 (plus $4,027 for each dependent child) | $71,497 (plus $5,034 for each dependent child) |
Medicare levy low-income thresholds 2024–25
| Low-income threshold (above which levy begins to phase in) | Full Medicare levy (2%) applies above* | |
| Singles | $27,222 | $34,027 |
| Single Seniors and Pensioners | $43,020 | $53,775 |
| Families (not eligible for Seniors and Pensioner Tax Offset) | $45,907 (plus $4,216 for each dependent child) | $57,383 (plus $5,270 for each dependent child) |
| Families (Senior and Pensioner) | $59,886 (plus $4,216 for each dependent child) | $74,857 (plus $5,270 for each dependent child) |
* The Medicare levy phases in at 10 cents for each dollar above the relevant low-income threshold until the full Medicare levy at 2% applies. This column shows the level of income at which the levy begins to be paid in full.
Source: Budget Paper No 2, p 5; Budget Factsheet — New tax cuts for every Australian taxpayer, p 1.
Higher education loan repayment changes
The government will reduce all outstanding Higher Education Loan Program (HELP) and other student debts by 20%, before indexation is applied on 1 June 2025. The cut will remove a total of $16 billion in debt.
The student loan repayment system will also be reformed from 1 July 2025 by moving to a marginal repayment system with a higher minimum repayment threshold. The minimum repayment threshold is proposed to increase from $54,435 in 2024–25 to $67,000 in 2025–26.
Both these reforms (which were previously announced in November 2024) will be subject to the passage of legislation.
Source: Budget Paper No 1, p 22; Budget Factsheet — Building Australia’s Future, pp 17 and 37; Minister for Education, “Building a better and fairer education system to support a stronger economy” [media release], 25 March 2025; Making HELP and student loan repayments fairer and 20% reduction of student loan debt, Department of Education website.
Start date deferred for measure to strengthen foreign resident CGT regime
The start date for the 2024–25 Budget measure to strengthen the foreign resident capital gains tax (CGT) regime will be deferred from 1 July 2025 to the later of 1 October 2025 or the first 1 January, 1 April, 1 July or 1 October after assent of amending legislation.
The 2024–25 Budget proposed to:
clarify and broaden the types of assets that foreign residents are subject to CGT on
amend the point-in-time principal test to a 365-day testing period, and
require foreign residents disposing of shares and other membership interests exceeding $20 million in value to notify the ATO prior to the transaction being executed (this notification process is intended to improve oversight and compliance with foreign resident CGT withholding rules where a vendor self-assesses their sale as not being taxable real property).
The start date for the measure has been deferred from 1 July 2025 to the later of 1 October 2025 or the first 1 January, 1 April, 1 July or 1 October after the amending legislation receives assent.
Source: Budget Paper No 2, p 4.
Restrictions on foreign ownership of housing
Measures will be introduced to ensure foreign investment in housing supports the government’s broader agenda to boost Australia’s housing supply by:
banning 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)
providing the ATO with funding over 4 years from 2025–26 to enforce the ban, and
providing the ATO and Treasury with funding from 2025–26 to implement an audit program and enhance their compliance approach to target land banking by foreign investors.
The enhanced compliance approach by the ATO and Treasury to target land banking will ensure foreign investors comply with requirements to put vacant land to use for residential and commercial developments within reasonable timeframes.
Source: Budget Paper No 2, p 6.
Tax Administration
Managed investment trust rules to be amended
Amendments to clarify the arrangements for managed investment trusts (MITs) will be made to ensure legitimate investors can continue to access concessional withholding tax rates for fund payments from 13 March 2025.
In particular, trusts ultimately owned by a single widely-held investor will be able to access the MIT concessions. The proposed changes will ensure that genuine, foreign-based widely-held investors, such as pension funds, can still access concessional withholding tax rates on eligible distributions to members through MITs.
This measure will complement the ATO’s strengthened guidelines. The amendments will not affect the ATO’s power to take action under the general anti-avoidance rules in Pt IVA of ITAA 1936 where “captive MITs” involve other characteristics of the kind set out in Taxpayer Alert TA 2025/1.
Source: Budget Paper No 2, p 4; Assistant Treasurer and Minister for Financial Services, Clarifying tax arrangements for managed investment trusts [media release], 13 March 2025.
ATO funding to strengthen compliance activities
The ATO will be given $999 million in funding over 4 years to extend and expand its tax compliance activities.
Additional funding includes:
- $717.8 million over 4 years from 1 July 2025 for a 2-year expansion and a one-year extension of the Tax Avoidance Taskforce, to support compliance scrutiny on multinationals and other large taxpayers
- $155.5 million over 4 years from 1 July 2025 to extend and expand the Shadow Economy Compliance Program, to reduce shadow economy behaviour such as worker exploitation, under‑reporting of taxable income, illicit tobacco and other shadow economy activity
- $75.7 million over 4 years from 1 July 2025 to extend and expand the Personal Income Tax Compliance Program, to enable the ATO to deliver a combination of proactive, preventative and corrective activities, and
- $50 million over 3 years from 1 July 2026 to extend the Tax Integrity Program, to continue the ATO’s engagement program to ensure timely payment of tax and superannuation liabilities by medium and large businesses and wealthy groups.
Source: Budget Paper No 2, p 7.
Not-for-profits
Deductible gift recipients list to be updated
The list of specifically listed deductible gift recipients (DGRs) will be updated to list the following organisations as DGRs:
- Community Foundations Australia Ltd for gifts received after 30 June 2025 and before 1 July 2030
- Equality Australia Ltd for gifts received after 30 June 2025 and before 1 July 2030
- Foundation Broken Hill Limited for gifts received after 30 June 2025 and before 1 July 2030
- Social Enterprise Australia Ltd for gifts received after 30 June 2025 and before 1 July 2030
- St Patrick’s Cathedral Melbourne Restoration Fund for gifts received after 30 June 2027 and before 1 July 2032, and
- Sydney Chevra Kadisha for gifts received after 30 June 2025 and before 1 July 2030.
In addition, Foundation Broken Hill Limited and Lord Mayor’s Charitable Foundation will retain their specific listing status in the tax law, allowing them to undertake charitable activities unique to their communities that would otherwise fall outside the community charity DGR category. They will no longer be included on a list of entities for DGR endorsement by the ATO as a community charity.
Source: Budget Paper No 2, pp 7–8.
Indirect Taxes
Freezing indexation on draught beer excise and excise equivalent customs duty rates
Indexation on draught beer excise and excise equivalent customs duty rates will be paused for a 2‑year period from August 2025.
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 take place. Biannual indexation will recommence from August 2027.
The Coalition announced on 1 March 2025 that, if elected, it would also freeze indexation on draught beer excise for 2 years.
Source: Budget Paper No 2, p 8; Prime Minister and Treasurer, Albanese Labor Government to freeze draught beer excise [joint media release], 1 March 2025; Shadow Treasurer, Coalition backs struggling hospitality sector left in ruins by Labor [media release], 1 March 2025.
