Treasurer Jim Chalmers has delivered his 2025 budget, ahead of the upcoming federal election. As expected from a pre-election budget, there was no shortage of sweeteners, particularly addressing cost of living pressures.

The biggest surprise was a cut in taxation.

Taxation

From 1 July 2026, there will be a proposed 1% reduction in the rate on income between $18,201 and $45,000. Dropping the rate from 16% to 15% will save every taxpayer earning $45,000 or above $268 per year. Further, it is proposed that the rate will drop a further 1%, to 14%, from 1 July 2027.

The low income Medicare thresholds are also set to be increased. This will allow more people on low incomes to avoid paying the Medicare surcharge.

Superannuation

Heading into the election, the Treasurer resisted announcing any changes to superannuation.

Interestingly, the government seems intent on continuing with the additional 15% tax on super balances above $3 million. The papers did not specifically mention this legislation, that has been blocked by the senate. However, the projected revenue from this proposed tax appears to remain in budget forecasts

Cost of Living

Included in the expenditure plans was a number of measures designed to help with rising cost of living pressures.

Electricity price relief announced last year, for households and small businesses, has been extended until the end of the year. All households and eligible businesses will continue to receive a $75 per quarter rebate on their power bill until 31 December 2025.

Healthcare gets a big boost with the announcement that maximum prescription prices under the Pharmaceutical Benefits Scheme will be reduced to $25 from $31.60. For pensioners and concession card holders, the $7.70 limit remains frozen until 2030.

As previously announced by the government, the 2025 budget includes additional expenditure on Medicare of $8.5 billion over 4 years. This is intended to greatly expand the availability of bulk billed GP visits. It is also intended to train additional nurses and GPs.

Seniors

The government has extended the freeze to the Centrelink deeming rates for another year. This assessment of income on investments is typically increased as the cash rate is increased, but will be frozen at a maximum of 2.25% until 30 June 2026. This allows many age pensioners to maintain a higher pension and help keep down the cost of aged care.

Housing

Although there have been no new announcements in this area, the government did flag some changes to the yet to be implemented Help to Buy scheme. This program will allow first homebuyers to co-own their property with the government. The adjustments include increasing the income thresholds and price cap for access to the scheme.

Restrictions on foreign ownership of Australian homes has also been announced. This includes a two year ban on foreign persons from acquiring established dwellings (with some exemptions), starting 1 April 2025.

Final thoughts

While many will get a sugar hit from the Treasurer’s budget sweeteners, very little in this budget is expected to impact long term planning. The future of many of the announcements will depend on the result of the upcoming federal election in May.

We would encourage readers to watch announcements during the election campaign for more information on potential future changes from both parties.

For further information on how the budget 2025 may affect you, please speak to your adviser.