On Tuesday, 25th March, the Labour government handed down its Budget for the 2025/26 year.

The announcements were concentrated around providing support to ease the cost of living. 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.

Taxation

Personal income tax cuts

Effective date: 1 July 2026

The lowest marginal tax rate of 16% will reduce to:

• 15% from 1 July 2026, and
• 14% from 1 July 2027

The table below summarises the tax schedules.

Note: Rates do not include Medicare levy or Medicare levy surcharge.

Superannuation

No new measures were announced for superannuation. Similar to previous years, additional funding will be provided to the ATO to focus on timely payment of superannuation payments, including from 1 July 2026 when Payday Super is proposed to commence. Payday super requires superannuation payments to be paid within a specified period (generally 7 days) after an employee receives their pay.

There was also no mention of Division 296 tax in the budget. This is a proposal to impose a soft-cap of $3m on superannuation and levy a tax rate of 15% on superannuation earnings (including unrealised capital gains) above $3m. The Div 296 Bill has struggled to pass through the Senate. It was again rescheduled for debate on 13 February 2025, as the last bill on the last day of the parliamentary sitting period, where it was not passed.

Super SG will increase to 12% on the 1st July 2025, as previously announced.

Cost of living

Energy Bill relief extended for 6 months

Effective date: 1 July 2025

Energy Bill rebates will be extended for another 6 months from 1 July to 31 December 2025. A rebate of $150 ($75 paid in 2 quarterly instalments) will apply to electricity bills for eligible households and small businesses.

Capped cost of PBS medicines

Effective date: 1 January 2026

The general co-payment for medicines under the Pharmaceutical Benefits Scheme (PBS) will be capped at $25 (currently $31.60) for individuals who are not concession card holders. Once the PBS Safety Net threshold is reached, the maximum co-payment reduces to $7.70 (until 1 January 2030). Concession card holders will continue to pay up to a maximum of $7.70 (until 1 January 2030). Once the PBS Safety Net threshold is reached, concession cardholders are dispensed PBS prescriptions at no further charge for the remainder of that calendar year. Concession cardholders are those who hold a:

• Pensioner Concession Card
• Commonwealth Seniors Health Care Card
• Health Care Card or DVA White, Gold or Orange Card

Social Security

No announcements in relation to an extension of the deeming rate freeze.

Deeming rates have been frozen since 1 July 2022 and were intended to be applicable for 2 years until 30 June 2024. This was extended for another year in last year’s Federal Budget with historically low deeming rates continuing to be frozen until 30 June 2025.

Currently deeming rates and thresholds are:

While deeming thresholds are indexed to CPI each year on 1 July, deeming rates are determined by the Minister for Social Services through a legislative instrument. It is unclear at this stage if and when the Minister will issue another legislative instrument to change deeming rates.

For some historical context, the following chart compares RBA cash rates to deeming rates. Until May 2022 (when the RBA started increasing rates), there had been some correlation between the RBA cash rate and deeming rates.

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.