The 2025–26 federal budget is shaped by an upcoming election and rising cost-of-living pressures. While there are no sweeping reforms, the government has delivered a budget designed to offer immediate relief without rocking the boat. From targeted tax cuts to housing and healthcare changes, this year’s announcements offer a mix of modest support and strategic signalling.
On the economic front, a deficit of $27.6 billion is expected for the year, with ongoing deficits forecast in the years ahead and no surplus in sight. Federal government debt is projected to rise to $1.22 trillion by the end of FY 2029. On a more optimistic note, the government is forecasting GDP growth of 2.75% and unemployment holding steady at around 4.25%. So while we’re heading deeper into debt, the outlook is for relatively steady—albeit expensive—economic sunshine.
Summary of the key measures most relevant below.
Cost-of-living relief
- Income tax cut for all taxpayers. The marginal tax rate for the bottom tax bracket will be lowered from 16% to 15% from 1 July 2026 and then to 14% from 1 July 2027. This will provide an average wage earner with an additional $268 a year in 2026-27 and $536 a year in 2027-28. These changes are part of the reworked alternative to the now-axed Stage 3 tax cuts, and are intended to favour low- and middle-income earners. For high-income earners, the benefit is relatively modest.
- Households will receive $150 in electricity bill support, paid in two $75 instalments over six months. Eligible small businesses will receive a further $150 rebate.
Health
- $8.4 billion over four years will go towards increasing GP incentives to boost bulk billing rates to 90%—a key part of the government’s cost-of-living relief strategy.
- PBS script costs will be capped at $25, easing pressure on household budgets.
- Australians can now access up to 60-day prescriptions for over 300 common medicines, reducing both pharmacy visits and out-of-pocket costs.
- $793 million will go toward improved access to contraceptives, menopause treatments and endometriosis care via the PBS.
- $240 million has been allocated to create 33 new women’s health clinics focused on pelvic pain, perimenopause and menopause.
- $588.5 million will be invested through the National Mental Health Agreement. The focus is on early intervention, with particular attention on youth mental health services.
Housing
- A two-year ban on foreign buyers of existing Australian property will be introduced. Foreign buyers will still be permitted to purchase new properties with government approval.
- The Help to Buy scheme has been expanded. Income thresholds will rise to $100,000 for singles and $160,000 for couples and property value caps will be increased to $1.3 million for people living in Sydney and other NSW regional centres. The scheme allows eligible participants to purchase a home with the government holding a share of the property. While it aims to help first-home buyers, the policy may place further pressure on already limited housing supply.
- Commonwealth Rent Assistance will increase by 15%, building on the 15% increase in 2023. Designed to help low- and middle-income renters amid high rental demand.
Education and skills
- Pending legislation, the government plans to cut existing student debt by 20%. While framed as cost-of-living support, the effect is muted—this is a one-off reduction in debt rather than cash in hand.
- The HELP repayment threshold will rise from $54,435 in 2024–25 to $67,000 in 2025–26. This means graduates can earn more before needing to start repaying student loans.
- $1.1 billion will fund fee-free TAFE places in priority sectors such as energy, construction and care.
- Further investment will support regional university campuses and apprenticeships.
Workforce and employment
- From 1 July 2025, superannuation will be paid on Commonwealth Paid Parental Leave. This $1.1 billion initiative supports gender equity and helps reduce the retirement savings gap for women.
- Non-compete clauses will be banned for workers earning under $175,000 per year. This is aimed at improving labour mobility, boosting competition and supporting wage growth. Treasury estimates affected workers could see wage increases of around 4%, or $2,500 per year.
Business and investment
- The $20,000 instant asset write-off will expire and revert to $1,000 from 1 July 2026. This signals an end to the recent tax planning opportunity that encouraged end-of-financial-year purchases for tax benefits.
- Around one million small businesses will benefit from an extended $150 electricity rebate.
- The hospitality sector and alcohol producers will benefit from a pause on draught beer excise indexation and increased support through the excise remission scheme.
- $566 million has been committed to emerging industries including green hydrogen, advanced manufacturing and quantum computing.
- Grants and tax incentives will support the development and commercialisation of clean technologies.
What this means for you
This year’s budget is designed to ease pressure rather than drive reform. While it’s unlikely to materially change the trajectory of the economy, it introduces a number of policy shifts that could affect how you manage cash flow, structure investments or run your business.