Federal budget 2025: tax cuts and more cost of living relief

The first round of Labor tax cuts came into effect in July 2024, now from 1 July 2026 the 16% tax rate, which applies to taxable income between $18,201 and $45,000, will be reduced to 15% delivering a tax cut for everyone earning over $18,201.  

In addition, from 1 July 2027, this tax rate will be further reduced to 14%.  

These changes mean a worker on average earnings will have an extra $268 in their pocket in 2026–27 and $536 per year from 2027–28, compared to 2024–25. 

The Medicare levy low‑income threshold will be raised by 4.7% for singles, families, and seniors and pensioners from 1 July 2024. This means more Australians on lower incomes will continue to be exempt from paying the Medicare levy or continue to pay a reduced levy rate. 

Beyond the tax cuts, more relief from cost-of-living pressures was announced in the form of $1.8 billion to extend energy bill relief to the end of the year with every household and small businesses receiving an extra $150 off energy bills in 2025. The government aims to drive up wages too, with $2.6 billion put aside for a wage increase for aged care nurses and measures to ban non‑compete clauses for low and middle-income earners to free people up to switch jobs.  

The big supermarkets got a warning, with the ACCC’s powers boosted specifically to fight shrinkflation and help farmers and suppliers get a fairer deal from Coles and Woolworths.   

The affordability of healthcare is on the agenda too, with cheaper medicines on the Pharmaceutical Benefits Scheme (PBS) and $8.5 billion to make more GP visits bulk billed. 

For those with student loans, the government announced plans to reduce all outstanding student debts by 20%. This will remove $16 billion from the student loan accounts of three million Australians. If the legislation to bring this measure in passes, it will also increase the amount that people can earn before they are required to start paying back their loans from $54,435 in 2024–25 to $67,000 in 2025–26. 

You know those annoying surcharges you're often hit with when you pay with your card? The budget included a mention that the government wants to ban debit card surcharges all together, so consumers get a fairer deal at the checkout.  

Further work with the RBA is needed to make sure that small businesses and consumers can benefit from lower cost payments, but this measure could save Australians a lot – it’s estimated we collectively lose about $500 million a year to card surcharges.  

Meanwhile, there’s a $6.7 million spend to extend the operation of the National Anti‑Scam Centre to continue protecting people from scam activity. This builds on over $180 million already invested since 2022 across a range of anti‑scam initiatives. The government says these measures have been successful, with scam losses decreasing by over $1 billion since 2022.