Federal Budget: cost of living relief once again in focus

This year’s budget was shaped by rising global trade tensions and ongoing cost-of-living pressures that threaten to curb investment and slow economic growth.

In releasing the latest budget, Treasurer Jim Chalmers used his speech to caution that the global economy is “volatile and unpredictable”, with a shift away from globalisation, the continued transition to green energy and the rapid rise of AI technology fuelling economic uncertainty around the world.

The budget looked to abate these fears, with several measures introduced to support local industry including a proposal to create 100,000 permanent free TAFE placements per year in key skill areas and restore consumer confidence with cost-of-living relief.

Many of these initiatives are geared towards lower income earners, however changes to superannuation transfer balance caps and other legislative measures set to take effect from 1 July may present their own considerations for those on higher incomes.

You’ll find more about those changes further down.

Further tax cuts for Australian workers

This year, the headline change was two modest tax cuts reducing the 16% income tax bracket 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 past this threshold will continue to be taxed at their usual rates. These cuts – which 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.

Additional support to address the housing crisis

This year’s budget has several measures aimed at tackling the ongoing housing crisis.

This includes expanding the ‘Help to Buy’ scheme that enables low-income earners to purchase a home with as little as a 2% deposit with the government to take up to a 40% equity stake in the property.

The government is also increasing the scheme’s caps on income and property prices, meaning more Australians will be eligible and can purchase more expensive properties with the government’s support.

Additionally, foreign investors will be banned from purchasing existing dwellings for two years from 1 April this year, with the Australian Taxation Office (ATO) receiving an additional $5.7 million from government to fund the ban’s enforcement.

Similarly, the ATO and Treasury will receive a total of $8.9 million to put towards curbing land banking by foreign buyers, in an effort to put more land to productive use. ‘Land banking’ is when investors buy land and keep it vacant, hoping to benefit from capital gains instead of rent.

Energy rebates extended until end of year

From 1 July 2025 until the end of the calendar year, every Australian household will receive $150 in energy bill rebates paid in two quarterly instalments of $75 each.

This is an extension of last year’s energy relief scheme which saw households receive $300 in rebates – leading to an estimated 25% reduction in direct energy costs incurred by households, according to the Australian Bureau of Statistics.

Households won’t be the only beneficiaries of this program extension, with one million small businesses also slated to receive the rebates, too.

This extension is expected to cost $1.8 billion.

Changes to childcare subsidies

Childcare has also been a focus of this year’s budget, with $427 million set aside to guarantee three days funding of subsidised childcare per week to all households earning less than $533,280 annually.

This plan will be effective from 1 January 2026. It marks an end to the activities test that currently excludes households where each parent doesn’t spend at least 16 hours a fortnight working, looking for work, or studying.

This change was legislated in mid-February 2025.

This is part of a broader boost to education funding, which includes wiping 20% off outstanding student loan debts prior to indexation on 1 June 2025, and additional $2.5 billion in university funding over 11 years, and permanently creating 100,000 free TAFE places each year from 1 January 2027.

End-of-financial-year preparations: what to watch for in July 

‘Transfer balance cap’ increased to $2 million

Retirees typically keep a portion of their super in a retirement phase account, which lets them draw down on their savings to use as an income.

These accounts are treated differently for tax purposes – for most Australians, earnings on the money held in these accounts are tax free. However, to stop people taking advantage of this beneficial tax treatment, there is a limit to the amount you can transfer from your accumulation account into a retirement phase account.

This means the individuals who begin their retirement phase income stream from 1 July 2025 will be able to put up to $2 million into an account-based pension.

Those already on a retirement phase income stream before this date may be eligible for a proportional increase in their cap, but this will depend on their individual circumstances.

It’s crucial to note though that the transfer balance cap is applied for life.

This means that if you’ve used up all of your cap, you won’t be able to move additional funds into a tax-free retirement phase account later, even if the cap is raised again afterwards.

If you haven’t reached your limit however, increases to the cap will apply and you will be able to contribute more money into your retirement phase account.

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

Additional taxes on super earnings for accounts with over $3 million

In 2023, a bill was put to Parliament that would introduce a 15% levy on any super earnings for accounts with 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 and has been read by the Senate once.

It will need to be read and debated at least twice more by the Senate before being legislated.

If the bill passes, and you have a super balance of more than $3m, the additional levy may result in additional taxes on gains in value. This could affect the long-term benefits achieved by keeping your money in super. You may need to speak with a financial adviser and tax professional to decide whether holding your savings in super is still the best strategy for your needs and review the other options available to you.

While government remains committed to introducing this tax, it has not yet been legislated and its passage through the senate could be affected by the upcoming federal election.

Super included on government paid parental leave

Another major change being introduced this year is paid super on parental leave. Parents with children born or adopted on or after 1 July 2025 will receive an additional payment of equal to 12% of their parental leave payments deposited into their nominated super account.

This policy was announced in 2024 as part of the government’s Working for Women strategy, released in March 2024, in a bid to close the gendered gap in retirement savings. The strategy will be administered by the ATO.

In addition, the government has announced the paid parental leave program will also be expanded on next year.

Under the current system, families receive up to 22 weeks of payment for a child. Two weeks are reserved for each parent within the couple, meaning that one parent cannot use all 22 weeks.

From 1 July 2026, the paid parental leave scheme will be expanded to 26 weeks, with a total of four weeks reserved for each individual parent. Additionally, both parents will be able to take up to four weeks of paid parental leave simultaneously. 

Do you have queries about the 2025 Federal Budget? ANZ Private can help

At ANZ Private we offer specialised banking and advice and work with high-net-worth clients to protect, grow and transition their wealth.

• Talk to your ANZ Private Banker directly
• Contact us by requesting a callback
• Learn more about ANZ Private