Federal Budget 2025-26

On 25 March 2025, the Federal Government delivered its fourth Budget, focusing on five key priorities, including cost-of-living relief, housing, and education.

From a tax and superannuation perspective, there weren’t any surprises, although the Treasurer did pull a rabbit out of the hat by announcing a small (very small) tax cut for individuals. Not many commentators had been expecting that.

Below you will find the key tax, superannuation and cost of living highlights together with measures already announced but not yet implemented to help you understand the changes that will impact you.

Please feel free to contact this office if you have any queries about them or how they may impact you in your circumstances.

Income tax measures

Personal tax cuts

It wouldn’t be an election Budget without at least a modest tax cut, and in his Budget Speech the Treasurer unveiled a small tax cut that will benefit all taxpayers, although they will have to wait more than two years to enjoy the full benefits.

As from 1 July 2026 the government proposes to shave 1% off the lowest tax bracket ($18,200 to $45,000), from 16% to 15%. Then, from 1 July 2027, another 1% comes off by taking the rate down to 14%. All this cutting will leave a taxpayer earning at least $45,000 better off by $268 in 2026-27 and $536 in 2027-28.

Economic times are tough, with the Budget sliding back into long-term deficits, so we suppose taxpayers should be grateful for whatever extra money comes their way, even $10 a week when it all finally comes through. With nominal wages on the rise, however, bracket creep will more than replenish the government’s coffers over time.

Of course, Labor needs to be re-elected before any of this comes to pass, although the Coalition may come along with tax cuts of their own. Bring it on.

Medicare Levy low income thresholds increased

The Medicare levy low‑income thresholds for singles, families, and seniors and pensioners are to be increased as from 1 July 2024. This is another form of a tax cut, and not one people have to wait two years for, so the proposed increases should be welcomed.

Higher education loan repayment changes

The government will reduce all outstanding Higher Education Loan Program (HELP) and other student debts by 20%, before indexation is applied on 1 June 2025. The proposed cut will remove a total of $16 billion in student debt.

In addition, the minimum repayment threshold is to increase substantially, moving from $54,435 in 2024-25 to $67,000 in 2025-26.

Both these changes had been previously announced late in 2024, but the Budget announcement shows the government remains committed to implementing them.

The missing Instant Asset Write-Off legislation

With the year end fast approaching, there are concerns that last year’s Budget announcement extending the $20,000 threshold for the small business Instant Asset Write-off to 30 June 2025 remains unenacted. As things stand, the threshold reverts back down to $1,000 for the 2024-25 financial year unless the law is changed to give effect to last year’s announcement. And there are unlikely to be any law changes this side of the election. We also note there has been no announcement for the 2025-26 financial year.

Readers may recall there were similar delays last year in relation to the 30 June 2024 extension, with amending legislation being passed at the eleventh hour.

Our preference would be to make the threshold a permanent feature of the law and to increase the threshold to at least $30,000.

Superannuation measures

Super Guarantee payable on payday from 1 July 2026

From 1 July 2026, employers will have to pay super at the same time as wages instead of every three months. This means if you’re paid weekly or fortnightly, your super will be too.

What this means:

Better tracking of super payments – you'll be able to see your super being paid in real time, making it easier to spot any missing contributions.
More money for retirement – getting super more frequently means it can start earning interest sooner, which adds up over time. According to the Treasurer, a 25-year-old earning a median income could have around $6,000 extra at retirement.
Cashflow impact for businesses – employers will need to adjust their cashflow planning to accommodate more frequent super payments.

This change is designed to protect workers and boost retirement savings, making super payments more reliable and transparent.

Extra tax for super earnings for account balances above $3 million

The 15% additional tax on superannuation “earnings” for individuals with account balances above $3 million from 1 July 2025 appears to remain government policy. This will be on top of the existing 15% tax on superannuation earnings. The Budget papers confirm that the government isn’t backing down on this policy, making it a likely election issue.

What this means:

This extra tax has some major flaws, including:

Taxing unrealised gains – meaning you could be taxed on profits you haven’t actually received.
A fixed $3 million cap – as super balances grow over time, more people will be affected.
Cashflow risks for SMSFs – especially for those holding property, farms, or land, where selling assets just to pay tax could be a real issue.

With the federal election approaching, time is running out for the Senate to debate this tax. If it doesn’t pass before the election is called, it will automatically disappear – a huge win after two years of industry pushback.

Cost of living measures

The government has announced a range of measures to help with everyday costs, including energy bill rebates, bulk billing incentives, and cheaper medicines.

Energy bill relief

Good news for households and small businesses – the government is extending energy bill rebates for another six months until 31 December 2025.

The changes include:

Eligible households will receive $150 in total ($75 per quarter) from 1 July 2025.
Small businesses that meet their state’s definition of a ‘small electricity customer’ will also receive $150 in total.
The discount will be automatically applied to your electricity bill by your energy provider.

Expanding bulk billing incentives

From 1 November 2025, bulk billing incentives will be expanded to all Medicare-eligible Australians – not just children under 16 and concession card holders.

A new Bulk Billing Practice Incentive Program will also reward general practitioners (GP) who bulk bill all Medicare consultations, making it easier to find doctors who bulk bill. The goal? Nine out of ten GP visits bulk billed by 2030.

Cheaper medicines

The Government is lowering the maximum cost of medicines on the Pharmaceutical Benefits Scheme (PBS) for everyone with a Medicare card and no concession card.

From 1 January 2026, the maximum co‑payment will be lowered from:

$31.60 to $25.00 per script for general Medicare cardholders
For concession card holders, the co-payment will stay frozen at $7.70

These measures aim to ease financial pressure and improve access to essential services for Australians.

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Can the cost of clothing be tax deductible?

By Brad Dickfos • December 9, 2025

Sometimes it can be, but only in limited circumstances. The tax deductibility of expenditure on clothing is subject to strict ATO guidelines. These cover occupation-specific clothing, compulsory or registered non-compulsory uniforms and protective items. Conventional clothing What you can’t claim is the cost of conventional clothing, even where your employer expects you to observe a particular dress style. You might work in an office environment, and your employer expects you to wear a business suit to work, even though you wouldn’t have even bought the suit but for your employer’s dress requirements. While the cost of the suit might seem like a work related expense, it is not deductible as it is conventional clothing that could also be worn outside of work. This makes it a private expense, even though it relates directly to your employment. Conventional clothing includes business attire, non-monogrammed black trousers and white shirts worn by wait staff, non-protective jeans and drill shirts worn by tradies and athletic clothes and shoes worn by PE teachers. Occupation-specific clothing On the other hand, occupation-specific clothing falls on the deductible side of the line, for example a chef’s distinctive chequered pants or a health worker’s blue uniform, including nurses’ stockings and non-slip shoes. Compulsory uniforms The cost of clothing that forms part of a compulsory uniform is generally deductible. A compulsory uniform is a set of clothing that identifies you as an employee of a particular organisation. Your employer must make it compulsory to wear the uniform and have a strictly enforced workplace policy in place. You can only claim a deduction for shoes, socks and stockings if: They are an essential part of a distinctive compulsory uniform, and The characteristics (the colour, style and type) are an integral and distinctive part of your uniform that your employer specifies in the uniform policy, for example, airline cabin crew members. You can claim for a single item of clothing such as a jumper if it's distinctive and compulsory for you to wear it at work. An item of clothing is unique and distinctive if it: Has been designed and made only for the employer, and Has the employer's logo permanently attached and is not available to the public. Just wearing a jumper of a particular colour is not part of a compulsory uniform, even if your employer requires you to wear it, or you pin a badge to it. Non-compulsory uniforms You can only claim for non-compulsory work uniforms if your employer has registered the design with AusIndustry. This means the uniform has to be on the Register of Approved Occupational Clothing. Your employer will be able to clarify whether your uniform is registered. Protective clothing The cost of protective clothing is deductible, and covers such items as: Fire-resistant clothing Sun protection clothing with a UPF sun protection rating Hi-viz vests Non-slip nurse’s shoes Protective boots, such as steel-capped boots or rubber boots for concreters Gloves and heavy-duty shirts and trousers Occupational heavy duty wet-weather gear Boiler suits, overalls, smocks or aprons you wear to avoid damaging or soiling your ordinary clothes during your work activities. Laundry and dry-cleaning costs and repairs You are entitled to a deduction for the cost of cleaning your deductible clothing. If you launder them at home, the Tax Office will allow you a deduction of $1 per load where the load contains only deductible clothing, or 50 cents per load where deductible clothing is mixed with other items. You are entitled to claim the cost of dry-cleaning deductible clothing, as well as the cost of mending and repairs. Record keeping You should keep receipts or other documentary evidence of your expenditure on buying, laundering or repairing deductible work clothing. Proof of laundering clothing at home can be in the form of diary entries. Allowances If your employer pays you a clothing allowance, this needs to be included in your assessable income, and you can only claim what you have actually spent. Feel free to come and see us for advice as to whether your expenditure on work clothing is deductible.

Division 296 Tax Revisited

By Brad Dickfos • December 1, 2025

Big news for anyone with a large super balance – the government has gone back to the drawing board on the controversial Division 296 tax , and the changes are a big step toward fairness and common sense. A quick recap When the Division 296 tax was first announced in 2023, it caused an uproar. The main problem? It would have taxed unrealised gains, that is, paper profits you haven’t actually made yet and set a $3 million threshold that wasn’t indexed meaning it wouldn’t rise with inflation. After a wave of feedback from the industry, the government has listened. The Treasurer’s new announcement, made in October 2025, fixes some of the biggest issues. The revamped version is designed to be fairer, simpler, and more in line with how tax usually works. The plan is to start the new system from 1 July 2026, with the first tax bills expected in 2027–28. What’s changing Here’s what’s new under the revised Division 296 tax: · Only real earnings will be taxed. No more tax on unrealised gains as you’ll only pay on earnings you’ve actually made. · Super funds will work out members’ real earnings and report this to the ATO. · The $3 million threshold will be indexed to inflation in $150,000 increments, keeping pace with rising costs. · A new $10 million threshold will be introduced. Earnings above that will be taxed at a higher rate of 40%, and that threshold will also rise with inflation. · The start date is pushed back to 1 July 2026, giving everyone more time to prepare. · Defined benefit pensions are included, so all types of super funds are treated the same. So what does this mean in practice? Think of it as a tiered tax system: · Up to $3 million – normal super tax of 15%. · Between $3 million and $10 million – taxed at 30%. · Over $10 million – taxed at 40%. Basically, the more you have in super, the higher the tax rate on your earnings above those thresholds. How it will work Super funds will continue reporting members’ balances to the ATO, which will figure out who’s over the $3 million mark. If you are, your fund will tell the ATO your actual earnings (not paper gains). The ATO will then calculate how much extra tax you owe. We don’t yet have the fine print on what exactly counts as “realised earnings,” but it’s likely to mean profits you’ve actually made, similar to how taxable income is treated now. What’s still up in the air While these updates make the system much fairer, there are still a few unanswered questions: · What exactly counts as “earnings”? Will it only include profits made after 1 July 2026, or could older gains that are sold later be included too? · What happens with capital gains? Super funds usually get a one-third discount on capital gains for assets held over a year, but it’s unclear whether that will still apply. · How will pension-phase income be handled? Some super income is tax-free when you’re in the pension phase, and we don’t yet know how that will interact with the new rules. · Can people with over $10 million move money out? If your earnings above $10 million are taxed at 40%, you might want to shift funds elsewhere but the government hasn’t said if that’ll be allowed. What it means for you If your super balance is over $10 million, the proposed rules mean that a portion of your superannuation earnings could attract a higher tax rate of up to 40%. For people with between $3 million and $10 million, the new system could also change how much tax applies to their super earnings, depending on how the final legislation defines “realised gains.” But don’t rush. These rules aren’t law yet, and if you take your super out, it’s hard to put it back because of contribution limits. It’s best to wait for the final legislation and get professional advice before making any decision to withdraw benefits from super.

Christmas and Tax

By Brad Dickfos • November 18, 2025

( ) Knowing the rules around Fringe Benefits Tax (FBT), GST credits and what is or isn’t tax deductible can help keep tax costs to a minimum. Holiday celebrations generally take the form of Christmas parties and/or gift giving. (<->)