Understanding the 2025-26 Australian Federal Budget
The 2025-26 Australian Federal Budget, released on 25 March 2025, introduces several measures designed to ease the financial strain on Australians. From tax cuts and cost-of-living relief to investments in healthcare, housing, and education, this budget impacts nearly every area of life. But how does it affect you? Whether you’re a business owner navigating new financial incentives, a parent seeking affordable childcare, or a retiree managing healthcare costs, there are changes that could impact your finances.
At Cordner Advisory, we’re here to break it down - no jargon, just the essentials. How does Labor’s pre-election budget pitch affect you? Whether you’re benefiting from tax cuts or seeing relief through energy rebates and excise freezes, we’ve got the insights you need to understand how the budget shapes your financial future. Keep reading to see what’s in store for you, your business, and your family.
Key Takeaways of the 2025-26 Australian Federal Budget
Tax Relief: Personal income tax cuts will begin on 1 July 2026, reducing tax rates for individuals earning up to $45,000 (from 16% to 14% by 2027-28). This will result in modest savings, with tax cuts of up to $536 per year by 2027-28.
Cost-of-Living Relief: The extension of the energy bill relief program, providing an additional $150 rebate per household for the remainder of 2025.
Healthcare: A historic $7.9 billion investment in Medicare, aiming to bulk-bill 9 out of 10 GP visits by 2030.
Student Debt: A 20% reduction in student loan debt for 3 million Australians.
Economic Outlook for Australia
Australia’s economy is expected to grow steadily in 2025-26, with a forecasted GDP growth of 2.25%. Although this is a bit slower than recent years, it’s still positive, thanks to strong consumer spending and government support. The budget also shows a deficit of $42.1 billion, which is an improvement of $4.8 billion from earlier estimates.
The government plans to reduce the national debt from 44.9% of GDP in 2022-23 to around 37% by 2028-29. However, there are still challenges ahead, with government spending expected to reach 28.5% of GDP. While the budget is improving in managing finances, there are concerns about the long-term impact of rising debt, with total debt expected to reach $1.22 trillion by 2028-29.
How the Budget Affects Your Business: Short-Term Relief and Long-Term Considerations
The 2025-26 Budget brings several measures aimed at easing financial pressure, including tax cuts and rebates that will increase disposable income for Australians. This boost in consumer spending could benefit businesses by driving demand in sectors like retail, hospitality, and services. Additionally, small businesses will receive further relief through the $75 rebate per quarter on energy bills, helping them manage rising utility costs.
A key measure for the hospitality sector is the freeze on beer excise rates for the next two years. This relief is specifically aimed at supporting small businesses, particularly pubs and bars, which rely heavily on beer sales. It’s designed to help them manage inflation and maintain their profit margins in a challenging economic climate.
However, while these measures provide immediate support, the long-term outlook remains uncertain. The government is funding these initiatives through increased national debt, projected to rise by $283 billion over the next four years. This means that while businesses may benefit in the short term, future tax increases or higher business costs could be a reality to address the growing debt burden.
The government's $1 billion investment in tax compliance will also have implications for businesses. Increased scrutiny from the Australian Taxation Office (ATO) means business owners must ensure they are adhering to tax regulations, potentially leading to more administrative work.
Beyond these immediate concerns, there is a pressing need for reforms to stimulate productivity and encourage investment in Australian businesses. While the budget has allocated funds for manufacturing and green energy projects, further investment and removing barriers to growth will be crucial for the long-term prosperity of Australian businesses and the economy.
How the 2025–26 Budget Affects You
For Families: Cost-of-Living Support, Childcare Subsidies, Healthcare Improvements
The 2025 Budget prioritises easing the financial burden for Australian families. With rising cost-of-living pressures, many households will benefit from several relief measures designed to reduce everyday expenses.
Energy Bill Relief: One of the standout initiatives is the extension of the energy bill rebate, which will provide an additional $75 rebate per quarter for all households, reducing electricity costs for millions of Australians. This initiative will help families manage their energy expenses as global energy prices fluctuate.
Subsidised Childcare: Starting 1 January 2026, families with young children will benefit from three days of subsidised childcare, designed to replace the Child Care Subsidy activity test. This will significantly reduce out-of-pocket costs for families, especially those on lower incomes.
Healthcare Accessibility: Families will also benefit from expanded Medicare bulk-billing services, aiming for 9 out of 10 GP visits to be bulk-billed by 2030. This will ease the cost of healthcare for families across the country.
Student Debt Relief: For families with university students, the 20% reduction in student loan debt (HELP debt) will make education more affordable, easing the financial burden on both current and past students who have accumulated debt, as well as their families.
For Small Businesses: Tax Relief, Compliance Funding, Industry-Specific Support
The 2025-26 Budget offers vital support to small businesses, providing financial relief and incentives to help them thrive in a challenging economic environment. Small businesses, as the backbone of the Australian economy, will receive targeted measures designed to encourage growth.
Tax Compliance and Support: Small businesses will benefit from nearly $1 billion in additional funding for the Australian Taxation Office (ATO) to enhance tax compliance efforts. This means businesses can expect more audits, scrutiny, and checks from the ATO as it strengthens its enforcement. While this will help ensure that businesses remain compliant, it also means that small business owners need to be particularly diligent about their tax filings and financial records to avoid any potential non-compliance issues or penalties.
Excise Relief for the Hospitality Sector: A freeze on excise rates for draught beer, which will remain in place for the next two years, provides direct relief to small hospitality businesses, particularly pubs and bars that rely on beer sales. Additional measures include increases to excise and rebate concession caps for wine and alcohol producers, supporting sectors that have been hit hard by inflation.
Business Investments: The extension of the “Help to Buy” program, which helps potential homebuyers by co-investing in their homes, will indirectly benefit small businesses in the construction and real estate sectors by stimulating demand for housing. Under this scheme, the government contributes a significant portion of the property's value-up to 30% for existing homes and 40% for new constructions. This contribution reduces the amount borrowers need to finance, enabling them to secure a home with a deposit as low as 2%. Consequently, participants can expect substantial monthly savings on their mortgage repayments.
For First Home Buyers: Housing Affordability Measures and Support
The 2025-26 Budget includes several initiatives to help first-time home buyers access the property market. Housing affordability remains a significant concern, and these measures aim to ease the financial burden for those purchasing their first home.
Help to Buy Scheme: The Government has expanded the "Help to Buy" program, offering equity contributions of up to 30% for existing homes and 40% for new homes. This initiative aims to reduce the deposit required for first home buyers, making homeownership more attainable. The Help to Buy scheme allows the government to contribute up to 30% for existing homes and 40% for new constructions, reducing the amount borrowers need to finance and enabling them to secure a home with as little as a 2% deposit, resulting in lower mortgage repayments.
First Home Buyer Incentives: The Government will allocate $800 million to further support first-time buyers. In addition to increasing income thresholds for eligibility, the government’s focus on increasing housing supply through infrastructure such as social housing investments will help first-time buyers access more affordable housing options.
For Seniors and Retirees: Healthcare and Financial Relief
Seniors, particularly those on fixed incomes, often face the highest cost-of-living pressures. The 2025–26 Budget introduces several measures designed to provide financial relief and ease healthcare costs for older Australians.
Healthcare Relief for Seniors: The budget allocates $792.9 million to improve healthcare services, particularly for older women. Additionally, the increase in Medicare levy low-income thresholds from 1 July 2024 will ensure that seniors on lower incomes will either be exempt from the levy or pay a reduced rate.
Energy Bill Assistance: Seniors will also benefit from the extended energy bill rebate, which will provide quarterly payments directly off their electricity bills, offering substantial relief to pensioners and older Australians living on fixed incomes.
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For Students: Student Debt Reduction and Education Funding
The 2025-26 Budget includes several measures to support students, particularly those burdened by high levels of debt after completing their higher education.
Student Loan Debt Reduction: The Government will reduce HELP and other student loan debts by 20%, providing $19 billion in savings for 3 million Australians. This reduction, coupled with changes to the repayment system, will make it easier for students and graduates to manage their finances.
Higher Education and Skills Investment: The Government continues to invest in education, with $5 billion committed to expanding access to early childhood education. The Free TAFE program will be made permanent, providing students in critical industries such as healthcare, construction, digital technology, and early childhood education - sectors facing significant skill shortages - with the opportunity to access education without the financial burden.
For Infrastructure and Economic Growth: Strategic Investments in Transport, Green Energy, and Manufacturing
The Government is committing over $17 billion to a 10-year transport infrastructure program, aimed at upgrading roads and rail across Australia. This includes funding to enhance manufacturing capabilities and invest in green energy projects, supporting the transition to a low-carbon economy. These efforts are expected to stimulate long-term economic growth and create more sustainable infrastructure.
For Green Energy and Manufacturing Sectors: Infrastructure Investment and Support
The 2025-26 Budget provides significant support for the green energy and manufacturing sectors, aiming to accelerate Australia’s transition to a low-carbon economy and foster long-term economic growth:
Investment in Green Energy Projects: The government is committing $17 billion to an infrastructure program that includes funding for green energy projects, creating new opportunities for businesses in the renewable energy sector and driving sustainability across the economy.
Manufacturing Support: The budget also allocates funding to enhance Australia’s manufacturing capabilities, supporting job creation and expanding the sector’s capacity. These investments aim to strengthen the nation’s manufacturing base, ensuring Australia remains competitive and contributes to long-term economic prosperity.
For Rural and Regional Australians: Infrastructure Investments and Challenges
The 2025-26 Budget includes several measures to support rural and regional Australians, focusing on infrastructure improvements:
Infrastructure Investments: The budget allocates significant funding to upgrading transport infrastructure, including road and rail improvements in rural areas. These projects aim to enhance connectivity, reduce transport costs, and stimulate local economies.
For Foreign Investors and Residents: Tax Changes and Property Ownership Restrictions
The 2025-26 Budget introduces several key measures affecting foreign investors and property buyers, with stricter tax rules and ownership restrictions:
Capital Gains Tax Changes: The government has tightened capital gains tax rules for foreign residents, which may impact the appeal of Australian real estate and assets for overseas investors.
Foreign Property Ownership Restrictions: A two-year ban on foreign ownership of established homes aims to curb speculation in the housing market, potentially reducing opportunities for foreign buyers to invest in Australian property. This measure is designed to improve housing affordability.
2025 Budget: Who Comes Out Ahead?
The 2025-26 Australian Federal Budget brings significant relief to households, small businesses, first home buyers, students, and green energy sectors - the real winners of this year’s budget.
Households, particularly lower and middle-income earners, will benefit from tax cuts, energy bill rebates, and expanded healthcare access, including bulk-billed GP visits. Small businesses gain from excise relief, energy rebates, and increased funding for tax compliance, while first home buyers are supported by the expanded Help to Buy scheme and additional financial assistance. Students will see reduced HELP debt and access to free vocational education through the permanent Free TAFE program. The green energy and manufacturing sectors also stand to benefit from substantial infrastructure investments aimed at boosting Australia’s transition to a low-carbon economy.
While the budget provides immediate relief for many, some groups may face challenges and emerge as this year’s losers. Foreign investors and property buyers are affected by stricter capital gains tax rules and a two-year ban on foreign ownership of established homes. High-income earners won’t see any immediate tax relief, and may eventually face higher taxes as the government tackles rising national debt. Rural and regional Australians could miss out on the full benefits of infrastructure investments, particularly if urban centres receive a disproportionate share. Lastly, the increased national debt, projected to rise by $283 billion over the next four years, poses long-term risks for future generations, who may face higher taxes or reduced public services to manage the debt burden.
What’s Next for Australians?
Looking ahead, the 2025-26 Australian Federal Budget offers much-needed relief for households, businesses, and key sectors such as healthcare and education. With tax cuts, energy bill rebates, and increased funding for vital services, the government is working to ease the burden of rising living costs in the short term. However, while these measures provide immediate support, long-term fiscal challenges remain.
As Australia navigates a volatile global economic landscape, the balance between immediate relief and sustainable growth will be pivotal in shaping the nation’s future. For Australians, the key takeaway is that while the budget sets a positive course for 2025, careful attention to fiscal health, increased productivity, and further economic reforms will be crucial for ensuring that future generations aren’t left with an unsustainable debt burden. It’s about laying the groundwork for a stable and prosperous future for all.
The path forward will rely on both short-term support and strategic long-term planning to ensure Australia continues to grow and thrive in a complex global economy.
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