2025 Federal Budget - the Election Budget
The 2025 Federal Budget has been announced. This year’s Budget provides cost of living relief through tax cuts, lower power bills, reduced co-payment for medicines and other measures. Please note that as with every Budget, the government announcements outlined are proposals only by the current government and need to successfully pass through Parliament before becoming law (unless stated otherwise). With the 2025 Federal Election now called for May 3rd, the focus will be on this, rather than both houses of Parliament passing these measures.
The key announcements in the Budget of potential relevance for you are:
1. Minor Future Tax Cuts
Personal tax cuts: All taxpayers will receive modest tax cuts starting from 1 July 2026. The 16% tax rate on taxable income between $18,201 and $45,000 will reduce to:
15% from 1 July 2026, and 14% from 1 July 2027. There will be no changes to the other marginal tax rates and thresholds. The annual tax savings for taxpayers earning over $45,000 p.a. would be $268 in the 2026-27 financial year and $536 p.a. for the 2027-28 financial year onwards.
Our thoughts: This reduction will have minimal cashflow impact, though will be considered in your tax planning and optimising annual deductible super contributions.
2. Health - Medical
The Government will provide funding for health sector policies, including:
• Medicare bulk billing incentives: Incentive payments will be introduced to expand bulk billing to all Australians from 1 November 2025. Also, a new Bulk Billing Practice Incentive Program will be introduced for general practices if they bulk bill every visit under Medicare. Nine out of 10 GP visits are expected to be bulk billed by 2030.
• Expansion of GP training places through the Australian General Practice Training Program and the Remote Vocational Training Scheme to deliver 200 new general practitioner training places each year from 2026, increasing to 400 from 2028.
• Salary incentives for junior doctors to specialise in general practice and to provide paid parental leave and study leave for trainee GPs.
• More funding for Australian doctors including 200 new junior doctor/internship rotations in primary care per year from 2026 increasing to 400 per year from 2028.
Our thoughts: The Government continues to seek to boost capacity in the Health sector, particularly general practice to ameliorate prevailing shortfall and future demographic pressure. The bulk billing incentives may have come too little too late for many GPs and GP practices who have moved away from bulk billing after many years of stagnant Medicare rebates and trust in the government to make this economically viable. The Bulk Billing Practice Incentive Program may be attractive to some GP practice business models though and in areas where privately billing patients is difficult.
4. Cost of Living
• Energy bill relief extended for six months: All Australian households and eligible small businesses will receive an additional energy rebate of $150. The rebate will be automatically applied to electricity bills between 1 July and 31 December 2025, in two quarterly instalments of $75. It’s expected that the eligibility rules that apply to small businesses will remain unchanged.
• Student loans to be cut by 20%: Student loans will be reduced by 20% before the annual indexation is applied on 1 June 2025. The changes will apply to all HELP Student Loans, VET Student Loans, Australian Apprenticeship Support Loans, Student Start-up Loans and Student Financial Supplement Scheme.
• Reduced student loan repayments: The income that can be earned before student loan repayments need to be made will be increased from $54,435 in 2024/25 to $67,000 in 2025/26. Also, repayments will be calculated on just the income earned above the $67,000 threshold, not on total income. The list of eligible student loans is covered in the measure above.
• Lower cap for PBS medicines: The maximum cost of Pharmaceutical Benefits Scheme (PBS) medicines will decrease from $31.60 to $25 per script from 1 January 2026. Pensioners and Commonwealth concession cardholders will still only pay the subsidised rate of $7.70 per PBS script until 1 January 2030.
Our thoughts: These measures again will likely have minimal cashflow impact for you, but may provide opportunities to capture these savings to allocate to your financial planning and wealth creation strategies.
5. Child Care Subsidy
• ‘3-day guarantee’ for child care subsidy: Families will be eligible for at least 72 hours per fortnight (three days per week) of subsidised Early Childhood Education and Care (ECEC) without having to meet certain activity requirements (such as paid work, volunteering and studying). A family income test limit ($533,280 in 2024/25) will still need to be met to be qualify for subsidised care. This measure is legislated to start from 1 January 2026.
Our thoughts: This subsidy may provide further cashflow improvement for eligible families, with opportunities to allocate any surplus to other financial strategies.
Summary
Many of the measures announced in the 2025 Federal Budget need to be passed as law to take effect and are also subject to the May 2025 federal election outcome. As with any change in legislation, there are typically strategies to make the most of the changes - and even emerge in a favourable financial position.
Please feel free to contact us if you have any questions or would like to discuss how these changes may affect you.