With an impending Federal election, the Government has handed down its 2025/26 Federal Budget, delivering a deficit after last year’s small surplus. The Government continues to focus on cost of living relief, including announcing personal tax rate cuts. The Budget does not provide relief for small businesses, with a noticeable omission being any extension to the increased instant-asset write off.

Personal Tax

Tax Rate Cuts

The Government has unexpectedly announced tax cuts to personal rates from 1 July 2026.  The tax cuts decrease the current 16% rate to 15% from 1 July 2026 and 14% from 1 July 2027.

The cuts will reduce tax payable for all taxpayers earning above $45,000 by $268 in the 2027 year and $536 dollars in the 2028 year onwards.

The Government states its aim is to provide more cost-of-living relief and boost labour supply, particularly for women.

 Medicare Levy

Medicare levy low-income thresholds will be increased from 1 July 2024, again  to provide cost-of-living relief.  The threshold increases are as follows: 

 Energy Relief—Extension

The Government is extending the energy relief rebates. It will continue the rebates of $75 per quarter for households and small businesses to 31 December 2025.

 ATO Compliance Funding & Other Measures

Funding Taxpayer Compliance

The Government will provide funding to the ATO of $999m over four years to extend and expand tax compliance activities. This includes funding for the following programs:

• Tax Avoidance Taskforce.
• Shadow Economy Compliance Program—to reduce shadow economy behaviour such as worker exploitation, under reporting of taxable income, and illicit tobacco.
• Personal Income Tax Compliance Program—to enable the ATO to continue to deliver a combination of proactive, preventative and corrective activities in key areas of non-compliance.
• Tax Integrity Program—to enable the ATO to continue to ensure timely payment of tax and superannuation liabilities by medium and large businesses and wealthy groups.

Foreign land ownership

The Government will ban foreign persons (including temporary residents and foreign owned companies) from purchasing established dwellings for two years from 1 April 2025, unless an exception applies. Exceptions will include investments that significantly increase housing supply or support the availability of housing on a commercial scale.

The ATO will be provided funding to enforce the ban. Funding will also be provided to the ATO and Treasury to implement an audit program and enhance their compliance approach to target land banking by foreign investors. This will be aimed at ensuring foreign investors comply with requirements to put vacant land to use for residential and commercial developments within reasonable timeframes.

Alcohol tax

The Government will pause indexation on draught beer excise and excise equivalent customs duty rates for a two year period, from August 2025. Biannual indexation of  the excise and duty rates due to occur in August 2025, February 2026, August 2026, and February 2027 will not occur. Biannual indexation will then recommence from August 2027.

The Government will also increase support available under the existing Excise remission scheme for manufacturers of alcoholic beverages and Wine Equalisation Tax (WET) producer rebate. Currently, all eligible brewers and distillers can receive an excise remission up to a cap of $350,000 and all eligible wine producers can receive a WET rebate up to a cap of $350,000. This measure will increase the caps for all eligible brewers, distillers and wine producers to $400,000 per financial year, from 1 July 2026.

Tax Practitioners Board

The Government will strengthen the sanctions available to the Tax Practitioners Board, modernise the registration framework for tax practitioners and provide funding to undertake additional compliance tar

geting high-risk tax practitioners. It will also support the sustainability of the tax profession by increasing the ease of re‑entry for tax and business activity statement agents who take career breaks.

Instant asset write-off (IAWO)

A noticeable omission is an increase to the IAWO threshold. This has been increased to $20,000 in the last two Budgets. The write-off is scheduled to revert to $1,000 from 1 July 2025. This is the first time in ten years that there has been no increase in the write-off threshold.

Please contact MC Tax Advisors if you would like assistance with the issues identified in this bulletin.