Federal Budget: support for business amid global uncertainty

There were two major themes in this year’s Federal Budget: the cost of living, and concerns over the impact global geopolitical factors might have on Australia’s economy.

In his speech, Treasurer Jim Chalmers cautioned that five “seismic changes” are pushing the global economy into a “new world of uncertainty”.

These included:

• A shift away from globalisation
• The green energy transition
• The rise of AI
• A change in age demographics
• Movements in the country’s industrial base

All of this is unfolding at a time when Australians remain deeply concerned about their day-to-day expenses.

In response, this 2025 Federal Budget focused on providing relief to households while supporting Australian businesses.

Further tax cuts for Australian workers

This year, the headline change was two modest tax cuts reducing the 16% income tax rate to 15% from 1 July 2026 and then down to 14% in 2027.

This rate is applied to earnings between $18,201 and $45,000. Earnings beyond this threshold will continue to be taxed at their usual rates. These cuts – which the government has described as “modest but meaningful” – will mean that every Australian paying income tax will keep more of their earnings each year.

For the average worker (earning $79,000 annually), these cuts will deliver a $268 reduction in tax in 2026 and $536 in 2027.

Cost-of-living relief may ease household financial pressures

For the third consecutive year, the Federal Budget has taken aim at the cost of living. This relief comes at a time when consumer confidence remains low: the latest ANZ Roy Morgan consumer confidence index data places confidence at 84.2, a figure that indicates negative confidence.

Measures targeting living costs include:

Significant investment into healthcare

• $7.9 billion has been set aside to provide additional bulk billing appointments with GPs.
• A further $792.2 million will be invested into women’s health, to deliver larger Medicare rebates and more bulk billing for appointments related to certain contraception types.
• The maximum price of medications on the PBS will be reduced from $31.60 to $25 per script.
• An additional $1.8 billion will be provided to public hospitals in 2025-26.
• $644 million has been earmarked to create 50 additional Medicare Urgent Care Clinics.

Investing in education and trades

• Government will wipe 20% off outstanding student loan debts prior to indexation on 1 July 2025.
• A new proposal could see the creation of 100,000 permanent free TAFE positions to address key skills shortages, potentially benefiting businesses that rely on these workers.
• An overhaul of occupational licenses could enable electricians to have their licenses recognised nationally, enabling them to move where their skills are needed most.

Several initiatives targeting housing affordability

• $1.5 billion has been set aside for the Housing Support Program to improve planning, develop infrastructure and build more social housing.
• The Help to Buy program will be expanded to increase the income thresholds for the scheme and allow more expensive properties to be purchased with as little as a 2% deposit by letting the government take a 40% equity stake in the purchased property. This expansion will cost $800 million.
• Foreign buyers will be banned from purchasing existing properties for two years, and the tax office and Treasury will receive additional support to clamp down on land banking, in an effort to put land to more productive use.

Non-compete clauses scrapped for low- and middle-income earners

Another major change is a proposed ban on non-compete clauses for Australians earning less than $175,000 a year, with the aim to enhance labour mobility and encourage entrepreneurship, competition and innovation.

This change will have several implications for business owners. On one hand, it means employees could potentially start their own rival businesses and take away existing clients, but on the other hand it could open up new hiring opportunities and expedite the acquisition of experienced staff.

Energy bill relief plan gets an extension

As part of a broader push to offer cost-of-living relief, this year’s Federal Budget included an extension of the energy bill subsidy program through until the end of the year.

From 1 July 2025, one million small businesses will automatically receive a $150 energy bill rebate – delivered in quarterly instalments. This follows last year’s similar $300 rebate program, which the Australian Bureau of Statistics estimates reduced energy prices by 25%.

This year’s rebate will also be applied to households, costing $1.8 billion all up.

More clarity on the government’s ‘Buy Australian’ plan

The government has also allocated $20 million towards its ‘Buy Australian’ campaign, which is intended to encourage Australian consumers to purchase Australian-made products amid a period of heightened global trade tensions.

The government flagged this funding earlier in March while encouraging Australian consumers to buy products made domestically rather than those imported from the US. This followed the Trump administration’s decision not to exempt Australian steel and aluminium exports from a new 25% blanket tariff on these commodities.

Additionally, the government has flagged plans to extend its Unfair Trading Practices Legislation to small businesses. Consultation on how this will be achieved is yet to commence.

Government vows to cut back on outsourcing

This year’s budget also includes a $2.1 billion reduction in spending on consultants and outsourced work, bringing these capabilities in-house instead.

Although this may help to offset government spending elsewhere, for small businesses and sole traders who provide consulting services, it means fewer opportunities in the public sector.

Additional support measures for hospitality and alcohol businesses

This year’s budget also included targeted support for pubs, brewers and bars, who will incur less in tax thanks to a two-year freeze on the draught beer excise. Additionally, the caps on excise remission claims and the winemaker rebate will increase to $400,000 from 1 July 2026, providing further tax relief.

Subsidised childcare activity test abolished

From 1 January 2026, all parents earning less than $533,280 annually will be entitled to a minimum of three days’ subsidised childcare per week without needing to pass the activities test.

In the past, this test required that each parent spend at least 16 hours a fortnight either working, studying, or actively looking for employment in order to qualify for subsidised childcare.

The removal of the test was approved by the Senate in mid-February, following a 2024 recommendation by the Productivity Commission. 

Business owners should consider their own financial position

From 1 July 2025, several changes to the super regime will come into effect. In addition to running their daily operations, business owners should consider how these changes will affect their own personal finances.  

Superannuation transfer balance cap increased to $2 million

The transfer balance cap is increasing from $1.9 million to $2 million from 1 July 2025. This means retirees will be able to transfer more of their superannuation from accumulation phase into a retirement account without incurring additional tax obligations.

Transfer balance caps are applied for life – that is, if you hit your cap limit you cannot place more money into the retirement phase, even if a subsequent Federal Budget sees the cap limit increased. 

If you do not reach your cap limit, the amount you can contribute may increase over time, as the general transfer cap limit – the limit applied to your retirement phase account when you start one – is indexed to inflation. 

You can review your personal transfer balance cap using the ATO’s online services by logging into your MyGov portal.

If you’re unsure about what this means for your retirement, you should speak with a qualified tax professional.

Additional taxes on earnings for super accounts over $3 million

In 2023, a bill was put forward to Parliament that would introduce a 15% levy on any super earnings for accounts over $3 million.

This proposed ‘Division 296’ tax was due to commence on 1 July 2025, but has been met with considerable pushback, delays, and public consultation. Currently, the bill has passed the House of Representatives, but is still to be considered by the Senate.

If the bill passes, and you have a super balance of more than $3 million, the additional levy may impact the long-term benefits achieved by keeping money in super. You should speak with a financial adviser and tax professional to decide on the best strategy for your needs. 

Changes to government-paid parental leave schemes

From 1 July 2025, the government will begin making super contributions for Australians on parental leave. This program will be administered by the ATO and be offered to primary caregivers receiving the government’s existing parental leave pay program.

Parents of children born or adopted prior to 1 July 2025 will not be eligible.

As this program is administered by government agencies, there won’t be any changes for business owners, however further changes to the paid parental leave program itself have been flagged.

From July 2026, eligible Australian parents will be entitled to 26 weeks of paid parental leave instead of the current 22.

Of those 26 weeks, four are reserved for each individual parent meaning one person can’t take the full 26 weeks. 

If you have any queries relating to the impact of 2025 Federal Budget on your business, talk to your accountant.