Federal Budget Summary 2025-26

Key Highlights

1. Business & Industry Support

• Tax Compliance Crackdown: $999 million to ATO for compliance on businesses and high-net-worth individuals.
• Foreign Investment Restrictions: Two-year ban on foreign buyers purchasing established dwellings.
• Infrastructure Investment: $17.1 billion for roads and rail, plus $3.2 billion for green manufacturing.
• Workforce: A ban on non-compete clauses for workers earning less than $175,000.

2. Cost Living Relief

• Tax Cuts: New tax brackets from 1 July 2026, with a reduction from 16% to 14% by 2027.
• Energy Rebates: $1.8 billion to extend electricity rebates for households and small businesses.
• Student Debt Reduction: 20% reduction in HELP/HECS balances, plus fairer repayment thresholds.
• Medicare & Health: $7.9 billion for bulk billing, hospital funding boost, and cheaper PBS medicines.

3. Housing & Education

• Housing Supply Boost: Expansion of Help to Buy scheme, new construction incentives.
• Education Investment: $5 billion for early education, permanent Free TAFE, university funding reforms.

Unpacking the 2025/2026 Federal Budget—an annual exercise where the government lays out its grand vision for the economy, while Australians try to decipher what it actually means for their businesses, families, and daily expenses. Each year, the budget aims to strike a balance between immediate relief and long-term growth, and this year is no exception.

At its core, the government has placed a strong emphasis on easing cost-of-living pressures, with targeted tax cuts and direct relief measures designed to provide some financial breathing room. Healthcare investment, particularly in Medicare, continues to be a priority, ensuring access to essential services remains viable and sustainable. Meanwhile, the broader economic strategy focuses on stability—supporting growth in key industries, addressing workforce challenges, and maintaining responsible fiscal management in the face of global uncertainties.

The result is a budget that attempts to juggle short-term financial relief with long-term economic resilience. Some measures will be welcomed immediately, while others will take time to play out. As always, the real test will be in the implementation and execution. Let’s dive into the key takeaways:

Economic Overview

The government has sought to provide short-term financial support for households and businesses, but questions remain about the long-term economic impact, particularly regarding productivity and business growth. Key economic indicators include:

• Deficit: The budget forecasts a $27.6 billion deficit for 2024-25, improving slightly over time. While the government has highlighted back-to-back surpluses in prior years, rising expenditure on social programs and infrastructure means deficits are projected to persist.
• Debt: Net debt is expected to remain stable between 21-24% of GDP, with gross debt projected to reach $1.22 trillion by 2028-29. The government’s fiscal strategy relies on controlling spending growth while continuing to fund major commitments.
• Growth & Employment: GDP growth is expected to rise to 2.75%, while unemployment is projected to hold steady at 4.25%. Wage growth and increased workforce participation are expected to support economic resilience, but business investment remains a key variable.
• Spending: The budget commits significant funding to healthcare, infrastructure, and energy transition projects. However, revenue forecasts do not signal any major tax reform, leaving longer-term fiscal sustainability dependent on economic growth rather than structural change.

In Detail

1. Business & Industry Support

While individual cost-of-living relief is a key budget theme, business-focused policies are more limited in scope. The government has taken a compliance-heavy approach, increasing tax enforcement while providing targeted incentives for certain industries.

ATO Compliance Expansion

A notable budget measure is the $999 million funding boost to the ATO, which will expand tax enforcement activities. With increased scrutiny, businesses will need to strengthen their tax governance frameworks, as audit activity is expected to rise significantly with particularly focus on:

• High-net-worth individuals and wealthy business groups.
• Mid-market businesses and SMEs, ensuring greater tax compliance.
• Multinational corporations, particularly regarding tax avoidance and offshore structuring.

Infrastructure & Industry Investments

The government has committed $17.1 billion to infrastructure projects, aimed at improving national transport networks. In addition, a $3.2 billion package supports the transition to green manufacturing, particularly in the metals industry, including:

• $7.2 billion allocated for Bruce Highway upgrades.
• $2 billion invested in the Melbourne Airport Rail Link, a key project for Victoria.
• Funding for low-emission aluminium and steel production.
• Incentives for companies investing in renewable energy and clean manufacturing technologies.

Foreign Investment & Housing Market Adjustments

To alleviate pressure on housing supply, the government has implemented a two-year ban on foreign buyers purchasing existing residential properties. These measures aim to stabilize the housing market, but their effectiveness will depend on wider economic conditions and interest rate trends. This is complemented by:

• Expansion of the Help to Buy scheme, enabling more Australians to enter the property market with government co-ownership.
• Increased financial incentives for apprentices in construction, including grants of up to $10,000 to encourage workforce expansion.

Non-Compete Clauses

The government is also closing loopholes in competition law that allow businesses to enforce wage restrictions without employees’ knowledge, further strengthening Labor market flexibility. This policy aims to boost wages and worker mobility by removing restrictions that prevent employees from moving to competing businesses or starting their own ventures. Research suggests that this reform could increase wages by up to 4% (or $2,500 per year) for affected workers and contribute to a $5 billion boost in GDP.

2. Cost-of-Living Relief

Addressing cost-of-living pressures is a core priority of this budget, with tax cuts, energy subsidies, and healthcare investments forming the foundation of the government’s strategy.

Personal Income Tax Cuts

From 1 July 2026, tax rates will be adjusted to provide additional relief to individual taxpayers. The 16% tax rate (applicable to incomes between $18,201 and $45,000) will drop to 15% in 2026, and further reduce to 14% in 2027:

For an average earner making $79,000, this translates to an annual tax saving of $268 in 2026-27, increasing to $536 per year from 2027-28 onwards.

Energy Bill Rebates

To counteract ongoing energy price pressures, the government has allocated $1.8 billion to extend energy bill relief for both households and small businesses.

• Every household and approximately one million small businesses will receive an additional $150 in electricity rebates.
• State and federal interventions have helped reduce electricity prices by 25%, but questions remain regarding the long-term stability of energy costs.

Student Debt & Higher Education Relief

These changes offer immediate relief, particularly for younger Australians struggling with inflation and wage stagnation. However, long-term education funding reform remains absent, leaving unresolved issues around university affordability and skills development.

• A one-time 20% reduction in HELP/HECS balances, eliminating approximately $19 billion in outstanding student debt.
• Higher repayment thresholds, with the minimum required repayment income rising from $54,435 to $67,000, easing financial strain on graduates.

Healthcare & Medicare Enhancements

Healthcare investments in this budget focus on expanding bulk billing, strengthening hospital infrastructure, and lowering medicine costs. These measures enhance immediate healthcare accessibility, but structural challenges remain, particularly in workforce shortages and hospital capacity constraints

• $7.9 billion to strengthen bulk billing, aiming to make 9 out of 10 GP visits free by 2030.
• Expansion of Medicare Urgent Care Clinics, with 50 additional clinics, bringing the national total to 137.
• Pharmaceutical Benefits Scheme (PBS) reforms, cutting medicine costs to a maximum of $25 per script, benefiting millions of Australians who rely on prescription medications.

3. Housing & Education

Housing & Construction Policies

Housing affordability remains a significant national concern, and the budget introduces several initiatives to stimulate supply and ease rental pressure.

• $16 billion in Housing Australia loan guarantees, supporting new property developments.
• Encouraging modern construction techniques to accelerate home-building efforts.
• Investment in social and affordable housing, with additional funding directed towards state-based initiatives.

Education and Workforce Development

Recognising the importance of skills development, the government has allocated $5 billion to early childhood education, with key provisions including:

• Guaranteed three days of subsidised early education per week for eligible families.
• Permanent Free TAFE, supporting vocational training and career pathways.
• University funding adjustments to align graduate skills with workforce needs.

This budget delivers a mix of short-term relief and long-term structural shifts. Tax cuts, energy rebates, and healthcare investments are all designed to provide some breathing room, while infrastructure and education funding aim to build a stronger foundation for the future. Of course, whether these measures translate into tangible improvements depends on execution—and the economy’s ability to play along. For now, businesses and households alike will be watching closely to see how these policies unfold. One thing is certain: tax season is never boring.

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