The Federal Budget 2025-26 has arrived with a range of promises—tax cuts, energy bill relief, and measures aimed at boosting the economy. But not everything made it across the line. A key small-business measure, the $20,000 instant asset write-off, remains stalled in Parliament, leaving many entrepreneurs unsure about their next move. In this post, we’ll break down the budget’s highlights (and lowlights) in plain language, with a special focus on how each measure might affect you—whether you’re a sole trader, a small business owner, or simply looking after your family’s finances.
1. Personal Income Tax Changes
One of the biggest talking points in this year’s budget is the “modest” two-stage personal income tax cut. The plan delivers small savings to low- and middle-income earners over the next few years.
Proposed Personal Income Tax Rates
| Income Range ($) | Rates in 2024–25 and 2025–26 (%) | Rates in 2026–27 (%) | Rates in 2027–28 (%) |
|---|---|---|---|
| 0 – 18,200 | Tax free | Tax free | Tax free |
| 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 |
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Why it matters: From 1 July 2026, those in the $18,201–$45,000 bracket see their tax rate dip from 16% to 15%, and then to 14% the following year. This could save you up to $268 in 2026-27 and $536 from 2027-28 onward.
2. Medicare Levy Thresholds
From 1 July 2024, the Medicare levy thresholds for low-income earners will rise, exempting more people from paying the levy. This change means smaller tax bills for qualifying individuals and families.
New Medicare Levy Thresholds
| Category | 2024-25 | 2025-26 |
|---|---|---|
| Singles | $26,000 | $27,222 |
| Families | $43,846 | $45,907 |
| Single Seniors & Pensioners | $41,089 | $43,020 |
| Family Seniors & Pensioners | $57,198 | $59,886 |
| Additional Child/Student | $4,216 | $4,027 |
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Here’s what that means for you: If your income hovers around these thresholds, you’ll likely pay less in Medicare levy when filing your tax return.
3. Energy Bill Relief
Small businesses and households will automatically receive a $150 credit on their energy bills each quarter from 1 July 2025 to 31 December 2025.
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Real-world impact: A small cafe might save $150 every three months, freeing up cash to reinvest in inventory or staffing.
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Action Step: Keep an eye on your utility statements to confirm you’re receiving this rebate.
4. Housing: ‘Help to Buy’ Program Extended
The Government’s ‘Help to Buy’ scheme helps eligible participants purchase a home with a smaller deposit by co-buying with Housing Australia. The income thresholds have been lifted to $100,000 (singles) and $160,000 (couples).
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For prospective homeowners: This could significantly reduce the upfront deposit needed. However, remember that the Government effectively takes a stake in your home.
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Action Step: If you’re considering buying a property, research eligibility and compare it to other home loan options.
5. The Missing Instant Asset Write-Off
A much-anticipated extension to the $20,000 instant asset write-off remains unlegislated. The measure, originally designed to let small businesses immediately deduct certain capital purchases (like new equipment), has stalled in Parliament and may lapse if not passed soon.
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Why it matters: Many small businesses planned on using this write-off to improve cash flow and invest in growth. Without clarity, you might need to reconsider large purchases or financing strategies.
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Action Step: Stay in close contact with us for updates on legislation. You can also check the ATO’s dedicated page for the latest information.
6. Other Key Measures
Foreign Resident CGT Amendments Delayed
Planned changes to capital gains tax for foreign residents won’t kick in until at least 1 October 2025. If you’re a foreign investor or own property abroad, you have more time to adjust.
Two-Year Ban on Foreign Ownership of Established Homes
From 1 April 2025, foreign and temporary residents, as well as foreign-owned companies, will be restricted from buying established properties—aimed at preventing “land banking.”
Non-Compete Clauses Banned (from 2027)
Low- and middle-income earners won’t be subject to non-compete clauses. Small businesses hiring staff should revise employment contracts accordingly.
Beer Tax Paused, Support for Wine & Alcohol Producers
Excise on draught beer is frozen for two years starting August 2025, and caps for alcoholic beverage producers rise to $400,000 per financial year from 1 July 2026. Great news if you run a bar, brewery, or distillery.
7. Government Spending & Compliance
The ATO is receiving almost $1 billion to enhance compliance programs, targeting tax avoidance and the shadow economy. Meanwhile, the Government aims to cut $700 million in external contractor costs.
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Practical takeaway: Expect stricter record-keeping requirements and potential audits. If you’re self-employed or run a small business, now’s the time to tidy up your books.
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Action Step: Schedule a meeting with us to ensure you’re meeting all compliance obligations.
8. Economic Outlook
Australia’s economy is projected to grow at 2.25% in 2025-26 and 2.5% in 2026-27, with the budget returning to a deficit of -$42.1 billion in 2025-26. Unemployment remains relatively low, and wages are slowly rising.
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What it means for you: Slow growth underscores the need for prudent budgeting and strategic planning—whether you’re managing a household or running a business.
What’s all this look like…
Budget 2025-26 offers a mix of small wins—like incremental tax cuts and energy rebates—and some significant question marks, particularly around the missing $20,000 instant asset write-off. Whether you’re a sole trader, a micro business, or an individual navigating rising living costs, the best approach is to stay informed and plan ahead.
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Review Your Finances: Check if the new tax thresholds or rebates can improve your cash flow.
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Keep an Eye on Legislation: The fate of the instant asset write-off and other stalled measures could influence big purchasing decisions.
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Seek Professional Advice: Unsure about how these changes affect you? A chat with your accountant or financial advisor can clarify your best course of action.
Need help making sense of the Budget?
Get in touch, and we’ll walk you through your options to ensure you’re prepared—no matter what happens in Parliament.
