Federal Budget 2025–26: Key Tax Changes

The 2025–26 Federal Budget was handed down on 25 March 2025. While much of the headline attention was on cost-of-living measures, there were several tax changes worth flagging for individuals, sole traders and small business owners.

Personal income tax: the Government announced two additional rounds of tax cuts to the 16% marginal rate, dropping to 15% from 1 July 2026 and 14% from 1 July 2027. Combined with the earlier Stage 3 changes, this means most working Australians will see a further reduction in tax payable over the next two financial years.

Medicare levy thresholds were also lifted for low-income earners, pensioners and families, meaning more taxpayers will fall below the levy threshold or pay a reduced amount.

Small business: the $20,000 instant asset write-off was extended for another 12 months for businesses with aggregated turnover under $10 million, allowing eligible depreciating assets to be immediately deducted rather than depreciated over time.

Integrity and compliance: additional funding was allocated to the ATO's Tax Avoidance Taskforce and the Shadow Economy Program, with a continued focus on unpaid super, GST fraud and personal services income arrangements. Expect more data-matching, more nudge letters and closer scrutiny of contractor-versus-employee classifications.

If you have any questions about how the Federal Budget changes affect your personal or business tax position, feel free to get in touch.