2025/26 Federal Budget

Following two years in surplus, the Australian Federal Government’s March 2025 budget was delivered, announcing a budget deficit of $27.6 billion which is forecasted to increase to $42 billion in 2025/26.

Ahead of the election, the government has made addressing the rising cost-of-living a high priority in this budget including proposing tax cuts and help for the forecasted rise in energy prices with the extension of energy bill relief.

This budget was delivered amidst a ‘volatile’ global environment with the US tariffs imposed onto Australia, which will likely affect Australian businesses and the wider economy. The message delivered to Australia in the budget was a focus and commitment to a ‘Future Made in Australia’ and a renewed focus on prioritising local industry.

2025/26 Federal Budget snapshot

Pre-election environment

 With a pending election, the government has announced a number of measures such as a boost to Medicare and tax relief with a focus on easing the cost-of-living.

Spotlight on cost-of-living

The budget focused on addressing the rising cost-of-living, with a number of tax cuts announced, but high costs for groceries, electricity and consumer goods are likely to remain.

Superannuation Reforms

Superannuation Guarantee

• The Superannuation Guarantee Contribution rate will increase from 11.5% to 12% from 1 July 2025. This could lead to an improved level of income in retirement.

Indexation

• Indexation of the general transfer balance cap will occur on 1 July 2025. This cap will increase from $1.9 million to $2 million, allowing further tax benefits for those contributing to super.

Commonwealth Paid Parental Scheme

• As announced in the last budget, from 1 July 2025 the government will pay superannuation on its paid parental leave scheme, with eligible parents of children born or adopted on or after that date receiving an extra 12% of their government funded paid parental leave as a contribution to their superannuation fund. This will help impacted members boost their financial security in retirement.

Payday super and recovering unpaid super

• The government is committed to working with the superannuation sector and broader industry on Payday Super and has confirmed this is on track to come into effect from 1 July 2026. Payday super will require employers to pay their employees’ super at the same time as their wages to help employees receive their super entitlements in a timely manner.
• A $50 million commitment has been made by the government to ensure the timely payment of superannuation liabilities from medium and large businesses. This crackdown has estimates that employees will see an additional approximately $31 million as a result.

Tax cuts

• The government will deliver new tax cuts over two years which will help with inflation remaining within the Reserve Bank of Australia’s target.
•  From 1 July 2026, the 16 per cent tax rate, which applies to taxable income between $18,201 and $45,000 will be reduced to 15 per cent.
•  From 1 July 2027, this tax rate will be reduced to 14 per cent.

Other measures announced

• $8.5 billion in funding has been earmarked to boost Medicare and lift bulk billing rates, along with a $644 million investment to add another 50 Urgent Care Clinics and build on the existing clinics.
• The government is extending energy bill relief to the end of 2025 for every household and around one million small businesses.
• Providing cost of living relief for retirees.

You can find more detail on the Federal Budget announcement at budget.gov.au

 

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