Federal Budget 2025 – What you need to know

On Tuesday, 14th May, the Labour government handed down its third Budget. The announcements were concentrated around providing support to ease the cost of living through 1 July tax cuts, lower power bills, higher welfare payments and support for small businesses. Here are some of the key Budget announcements that may affect you.

Note that each of these proposals will only become law if it is passed by Parliament.


Cost of living

Energy bill relief: All Australian households will receive an energy rebate of $300 and eligible small businesses will receive $325 from 1 July. It’s not yet known exactly when rebates will be applied to accounts.

Student debt indexation changes: Higher Education Loan Program (HELP) loan holders will benefit from changes to indexation, with debts to be increased by the lower of inflation and wages growth. Currently, these debts are indexed to inflation annually on 1 June. The change will be backdated to 1 July 2023 and an ‘indexation credit’ may be provided to reduce outstanding loan balances. To estimate indexation credits, check out this HELP Indexation Credit Estimator. If a voluntary payment is made to reduce the HELP balance and any indexation, it’s important to leave enough time after the payment is made for it to be processed by the ATO. The ATO usually release payment cut-off dates and publish this on their website.

Freeze on cost of PBS medicines: The maximum Pharmaceutical Benefits Scheme (PBS) co-payment of $7.70 will be frozen for pensioners and Commonwealth concession cardholders until 31 December 2029. For all other Medicare card holders, the co-payment of $31.60 is frozen until 1 January 2026. The co-payment is the amount that must be contributed towards the cost of PBS subsidised medicines.


Personal taxation

Tax cuts for all taxpayers: From 1 July, 13.6 million taxpayers will pay less tax compared to the current financial year, when the re-worked Stage 3 tax cuts take effect. The tax savings depend on taxable income and can be estimated using this Tax cuts calculator. The table below outlines the new rates and thresholds from 1 July 2024, as well as the current financial year. The tax cuts aim to provide cost-of-living relief, but may also be used to reduce debt, invest or top-up super.

Current financial year (2023/24)

From 1 July 2024

Taxable income

Tax rate*

Taxable income

Tax rate*

Up to $18,200


Up to $18,200


$18,201 – $45,000


$18,201 – $45,000


$45,001 – $120,000


$45,001 – $135,000


$120,001 – $180,000


$135,001 – $190,000


> $180,000


> $190,000


* Plus Medicare levy/surcharge where applicable


Business taxation

Instant asset write-off extended: Small businesses with a turnover less than $10 million will be able to claim an immediate tax deduction for the full cost of eligible assets costing less than $20,000 for another 12 months until 30 June 2025. The $20,000 threshold applies to each eligible asset purchased. Also, the asset must be first used or installed ready for use between 1 July 2024 and 30 June 2025.



Super on Paid Parental Leave: Superannuation Guarantee contributions will be paid to all recipients of Government-funded Paid Parental Leave from 1 July 2025. Contributions will be at the same rate as employer contributions under the Superannuation Guarantee, which will be 12% from 1 July 2025.


Social security and aged care

Deeming rates to stay frozen in 2024/25: The ‘deeming rates’ that are used to assess income from financial investments (such as bank accounts, shares, and managed funds) will remain unchanged until 30 June 2025. Instead of assessing actual investment and bank account earnings, the deeming rates are used to determine the income that certain financial investments earn for the purpose of calculating entitlements to certain payments and benefits. This may benefit Age Pensioners, other income support recipients and concession card holders.

Support for renters:  On 20 September 2024, the maximum Commonwealth Rent Assistance payment will increase by 10%, in addition to the regular half-yearly indexation. Rent Assistance may be available for people who pay rent and receive certain payments from Services Australia.

More work flexibility for carers: From 20 March 2025, Carer Payment recipients will be able to work up to 100 hours at any time in a four week period without losing their payment. This is known as the ‘participation limit’ and it’s currently a maximum of 25 hours every week. Also, travel time, education and volunteering activities will no longer count towards the participation limit; only actual hours worked.

More home care packages: An additional 24,100 home care packages will be made available in 2024/25. These packages will provide ongoing care to help older Australians to stay in their homes for longer.


Legislative update

The Government has a number of measures both legislated and unlegislated in train. A number of superannuation caps and
thresholds are also due to increase on 1 July 2024. While not addressed in the Budget, the following is provided as a reminder of
these measures.

Superannuation rates and thresholds

Contributions caps and thresholds



Concessional contributions (CC) cap



Non-concessional contribution (NCC) cap



General NCC cap three-year bring forward



CGT cap amount



Co-contribution lower threshold



Co-contribution higher threshold




NCC bring forward 2024/2025

Total Super Balance 30 June 2024


NCC cap for 2024-25


Maximum bring-forward period

Less than $1.66m


3 years

$1.66m to less than $1.78m


2 years

$1.78m to less than 1.9m


No bring forward. General NCC cap applies

$1.9m +




Superannuation Guarantee Charge



SG Charge percentage



Maximum SG contribution base per quarter



Maximum SG contribution base (annualised)




Preservation age increasing to 60 for everyone from 1 July 2024

Starting from 1 July 2015, depending on a person’s date of birth, preservation age has been gradually increasing from age 55 to 60.
From 1 July 2024, preservation age will be age 60 for everyone.
The increase in the preservation age will impact a number of strategies:

  • Retirement condition of release: From 1 July 2024, a member can meet the retirement condition of release through two definitions:
    – Has reached age 60 and ceases employment on or after turning 60. Only the balance as at termination date can be
    unrestricted non-preserved.
    – Has reached age 60 and does not intend to work more than 10 hours per week. The entire balance can be unrestricted
  • Commencement of Transition to Retirement Income Streams: With preservation age increasing to 60, this means that that Transition to Retirement Income Streams can only be commenced once the individual has reached at least age 60.
  • Low-rate cap for super lump sum withdrawals is a redundant concept: Since 1 July 2015, where a person was over preservation age and less than age 60, they got the benefit of the lifetime low rate cap which assisted with reducing tax on super lump sums. As the low-rate cap only applied to those who were over preservation age and less than 60, from 1 July 2024, with preservation age being 60, low rate cap for super lump sum withdrawals is a redundant concept. This is because super benefits from taxed-funds are tax-free if the withdrawal is made once the individual is 60 or over and up to 22% applies if the person is under preservation age.


Division 296 tax – reducing tax concessions on super balances over $3 million

Initially announced on 28 February 2023, the Government has since introduced the amending bill into parliament on 30 November 2023 but is not yet legislated.

Proposed to commence on 1 July 2025, the changes will reduce the tax concessions on superannuation balances over $3 million
by levying a 15% tax on the proportion of earnings on an individual’s total super balance (TSB) of more than $3 million.

Tax liability = 15% x earnings x proportion of earnings above $3 million.


  • Earnings = (TSB on 30 June of current financial year + withdrawals – net contributions) less TSB on 30 June of previous
    financial year.
  • Proportion of earnings = (TSB on 30 June of current financial year – $3 million) / TSB on 30 June of current financial year.
The amending bill provided details on what is counted as withdrawals and net contributions. Withdrawals includes lump sum
withdrawals, super contribution splits to a spouse and amounts released under First Home Super Saver scheme. Net contributions
includes non-concessional contributions or 85% of concessional contributions, spouse contribution splitting amounts received,
insurance proceeds and transfers from a foreign super fund.
Importantly, the amending bill also made changes to the definition of TSB which will apply beyond Division 296 to other
purposes such as determining an individual’s non-concessional contribution cap as well as the ability to utilise catch-up concessional contributions.
The new TSB definition is broadly the sum of each super interest’s total super balance value and it is:
  • The account balance for accumulation phase super interests and account-based pensions.
  • The maximum commutation value for innovative super incomes (excluding deferred income streams).
  • The family law value or a scheme specific amount for defined benefit pensions.


Supporting you through the changes

Depending on your circumstances, the Budget proposals may have an impact on your financial situation and your financial plans for the future.

If you have any concerns, or would like to discuss your financial strategy, please don’t hesitate to get in touch with us on (08) 8312 0000 to arrange an appointment.

Sources: www.budget.gov.au, Challenger, Colonial First State & MLC.