The 2025 Federal Budget measures are as follows:

Income tax cuts

As part of the 2025/26 Federal Budget, the government announced personal income tax cuts over the next couple of years which are in addition to previous tax cuts announced. The reduced tax rates apply to taxable incomes earned between $18,201 and $45,000, where the tax rate will be reduced in two stages to:

• 15% from 1 July 2026; and
• 14% from 1 July 2027.

The new tax rates can be illustrated by the following table:

The Medicare levy low-income thresholds will increase from 1 July 2026

• The threshold for singles will be increased to $28,011.

• The family threshold will be increased to $47,238.

• For single seniors and pensioners eligible for the SAPTO, the threshold will be increased to $44,268.

• The family threshold for seniors and pensioners eligible for the SAPTO will be increased to $61,623.

• For each dependent child or student, the family income thresholds will be increased from $4216 to $4,338.

Medicare levy surcharge income thresholds and rates for 2025-26 will increase to the following:

The family income threshold is increased by $1,500 for each MLS dependent child after the first child.

Working Australians Tax Offset

This tax offset will come into effect from 1 July 2027 and provides a tax offset of up to $250 for those taxpayers who derive earned income from employment or business income earned as a sole trader

Standard deduction for work related expenses

From 1 July 2026, individuals will be able to claim an upfront deduction of up to $1,000 for eligible work-related expenses. The standard deduction will only apply to those resident individual taxpayers that derive income from employment or carrying on a business as a sole trader.  Current substantiation arrangements will continue to apply where the work-related expenses amount to more than $1,000 or for individuals that only earn business or investment income.

Reforms to negative gearing arrangements

Legislation has now passed amending negative gearing arrangements.  From 1 July 2027, significant reforms to the negative gearing arrangements were introduced, removing access to the tax benefits associated with net rental losses for established residential properties purchased after 7:30pm on 12 May 2026.  However, existing property owners and those purchases made under contract prior to 12 May 2026 are grandfathered and can continue to access negative gearing arrangements under the current rules. 

The effect of these measures is to quarantine net rental losses from residential dwellings purchased after 12 May 2026 so they may only be deductible against assessable income from residential dwellings. Negative gearing arrangements under current rules will only continue to apply for residential property investments that are new builds.

Reforms to the capital gains tax legislation

From 1 July 2027, the 50% CGT discount method that applied to all CGT assets held by individuals, trusts and partnerships will be replaced and gains will be calculated by applying inflation (CPI) indexation to the cost base for assets held for at least 12 months.  Accordingly, only the real gain above inflation will be taxed. The legislation also includes a new 30% minimum tax rate on capital gains.  Assets acquired before 20 September 1985 that are currently exempt from capital gains tax, will now become subject to CGT on gains made from 1 July 2027.

Any capital gain relating to the period prior to 1 July 2027 will continue to be taxed under the current CGT rules.