The 2025 Federal Budget was handed down on 25 March 2025. The Budget was more about the upcoming election and less about any significant announcements or proposed changes.
This Budget Summary is not designed to cover all aspects of the Federal Budget. It is solely focused on the key financial planning areas which relate to our clients – superannuation, taxation and social security.
Key proposals of relevance include:
- Small tax cut for all Australian taxpayers
- Energy bill payment for all Australian households and small businesses ($150)
- No announced freezing of the deeming rates
It is important to note that at this time these proposed measures are not yet law and could change through implementation.
Superannuation & Pensions
There were no relevant announcements on superannuation.
Superannuation Caps and Thresholds
Whilst not mentioned in this Budget, the following is a reminder of the superannuation caps and thresholds.
| Contribution Caps and Thresholds | |
| Contribution Type | 2025/26 |
| Concessional contributions cap | $ 30,000 |
| Non-concessional contributions cap | $120,000 |
| Non-concessional 3 year bring forward | $360,000 |
Concessional and non-concessional contributions are explained in detail here – https://perthfinancialplanning.com.au/superannuation-contributions
| Superannuation Guarantee (SG) Rate | |
| Effective tax-free threshold | 2025/26 |
| SG percentage | 12% |
The general Transfer Balance Cap (the maximum a person can transfer to a tax-free pension product) will increase from $1.9 million to $2 million.
Taxation
Personal Income Tax Cuts
From 1 July 2026, the 16 per cent rate will be reduced to 15 per cent.
From 1 July 2027, the 15 per cent rate will be reduced further to 14 per cent.
This will provide a tax cut of up to $268 in 2026–27 and up to $536 in 2027-28, relative to current tax settings.
| Tax Rates | |||
| Current Financial Year (2024/25) | From 1 July 2026 | From 1 July 2027 | |
| Income | Tax rate | Tax rate | Tax rate |
| Up to $18,200 | Nil | Nil | Nil |
| $18,201 – $45,000 | 16% | 15% | 14% |
| $45,001 to $135,000 | 30% | 30% | 30% |
| $135,001 to $190,000 | 37% | 37% | 37% |
| Above $190,000 | 45% | 45% | 45% |
If you are eligible for the Low Income Tax Offset (LITO) and/or eligible for the Seniors and Pensioners Tax Offset (SAPTO) the tax free amount you can earn is:
| Tax Free Rates with LITO and/or SAPTO | |||
| Effective tax-free threshold | 2024/25 | 2026/27 | 2027/28 |
| Not eligible for LITO or SAPTO | $18,200 | $18,200 | $18,200 |
| Eligible for LITO only | $22,575 | $22,867 | $23,200 |
| Eligible for LITO and SAPTO (single) | $35,813 | $36,960 | $38,147 |
| Eligible for LITO and SAPTO (couple) | $31,888 | $32,773 | $33,783 |
Medicare Levy – Low-Income Thresholds
From 1 July 2024, the Medicare levy low-income thresholds will retrospectively be increased.
| Medicare levy low-income thresholds | ||
| 2023/24 | 2024/25 | |
| Singles | $26,000 | $27,222 |
| Families* | $43,846 | $45,907 |
| Single seniors and pensioners | $41,089 | $43,020 |
| Family seniors and pensioners | $57,198 | $59,886 |
* The family income thresholds will increase by $4,216 for each dependent child or student, up from $4,027.
Small Business
Other than the $150 electricity bill rebate, there were no relevant announcements for small business.
Social Security & Welfare
Freezing of Deeming Rates extended
There was speculation that the Government would make an announcement regarding a possible extension on a further freeze of deeming rates, however no announcement regarding deeming rates was included in the Federal Budget.
| Deeming Income Rates for Financial Assets | ||
| Deemed earnings | Single | Couple (combined) |
| 0.25% | First $60,400 | First $100,200 |
| 2.25% | Above $60,400 | Above $100,200 |
If the deeming rate freeze ends on 30 June 2025, many social security recipients will see a substantial reduction in their rate of payment.
For example, if deeming rates increase to 4% and 6%, a single Age Pensioner homeowner with $310,000 in financial investments would see a reduction in their Age Pension of $5,812.50 p/a under the income test.
It will also have an impact on those with significant assets and who have a Commonwealth Seniors Health Card.
Electricity Bill Relief
From 1 July 2025 to 31 December 2025, electricity bill relief of up to $150 will be provided to all Australian households. $75 will be paid in two quarterly instalments.
Reduced Student Debt
From 1 July 2025, all outstanding Higher Education Loan Program (HELP) debt, as at 1 June 2025, will be reduced by 20 per cent.
In addition, from 1 July 2025 the Government will increase the amount that people can earn before they are required to start paying back their loans from $54,435 in 2024–25 to $67,000 in 2025–26.
Guaranteed 3 days of early childhood education and care
From 1 January 2026, families will be eligible for at least 72 hours per fortnight (three days a week) of subsidised Early Childhood Education and Care (ECEC) without having to satisfy the Child Care Subsidy (CCS) activity requirements.
Eligibility for subsidised care will continue to include a family income test limit ($533,280 in 2024/25).
