2025–26 Federal Budget: What It Means for Your Tax, Super, and Retirement Plans

On 25 March 2025, Treasurer Jim Chalmers delivered the 2025–26 Federal Budget. This year’s Budget outlines the government’s focus on:

• Easing the cost of living
• Strengthening Medicare
• Expanding housing supply
• Investing in education
• Building a more productive, resilient economy.

Several proposed measures have direct implications for individuals planning for retirement, aged care, or simply looking to manage their tax position more effectively.

A summary overview of the measures is as follows:

Below we have included some additional information on some of the key measures.

1. Tax Cuts for Lower-Income Earners

The government has proposed reducing the lowest marginal tax rate from 16% to 14% over two years:

• From 1 July 2026: 16% → 15%
• From 1 July 2027: 15% → 14%

This change affects any individual taxed on income between $18,201 and $45,000. The cuts will deliver tax savings of up to $536 per year from 2027–28 onward.

Rates shown do not include Medicare Levy of 2%.

Planning Considerations:

• Individuals with low taxable income levels may need to reassess the value of concessional (pre-tax) super contributions vs non-concessional (post-tax) contributions.
• Consider eligibility for the Seniors and Pensioners Tax Offset (SAPTO), which can reduce the amount of tax you pay if you’re eligible.
• Evaluate cashflow implications for your budgeting and retirement planning.

2. Medicare Levy Threshold Increases

To help with cost-of-living pressures, the Government has raised the income thresholds at which individuals and families begin paying the Medicare Levy.

This may offer additional breathing room for lower-income households, particularly those eligible for Seniors and Pensioners Tax Offset (SAPTO).

3. Social Security Deeming Rates Remain Frozen

While not officially extended in this Budget, media reports suggest the government may keep deeming rates frozen beyond 30 June 2025. This is particularly relevant for retirees relying on income-tested benefits.

Planning Tip:

Lower deeming rates may mean higher Age Pension entitlements for some individuals. It’s worth reviewing your current financial position with this in mind.

4. Aged Care Reforms and Funding

The Budget includes significant funding to support aged care reforms, including:

• Continued rollout of the Aged Care Act 2024.
• Funding for culturally appropriate aged care assessments for First Nations people.
• Wage increases for aged care workers (an additional $2.5 billion over five years).

These changes aim to improve care quality and accessibility—important if you’re planning for personal or family aged care needs.

5. Energy Bill Relief and Health Care

To help combat inflationary pressures:

• Households will receive $150 in energy bill rebates from 1 July 2025 ($75 per quarter)
• The Pharmaceutical Benefit Scheme (PBS) co-payment will drop from $31.60 to $25.00 per script (for non-concession card holders)
• Medicare bulk billing incentives are expanding significantly from 1 November 2025.

These measures aim to ease the burden on both day-to-day and healthcare-related expenses.

6. Superannuation Changes: Transfer Balance Cap and SG Rate

Two major superannuation updates:

Transfer Balance Cap (TBC)

From 1 July 2025, the TBC will increase from $1.9 million to $2 million.

This change may allow more individuals to:

• Commence or increase tax-free retirement income streams
• Make larger non-concessional contributions

Super Guarantee (SG) Rate

The SG rate increases to 12% from 1 July 2025 (previously 11.5%).

Planning Considerations:

If you’re salary-sacrificing into super, check that the SG increase doesn’t push you over the annual concessional cap.

7. Legacy Pension Exit Opportunity

Legislation introduced in December 2024 allows eligible super fund members to exit legacy income streams (commenced before 20 September 2007) over a five-year window. While social security advantages may not carry over, this flexibility creates opportunities to:

• Reallocate funds into more efficient structures
• Simplify retirement income streams.

Speak with your advisor if you’re holding a legacy product—it may be time to explore more suitable alternatives.

8. Other Legislative and Policy Measures

• No progress on the Division 296 Bill, which introduces a super earnings tax on balances over $3M.
• From 1 July 2026, employers will be required to pay employer super guarantee contributions closer to pay days (within 7 days of wage payment).
• An additional $50 million has been allocated to the ATO to ensure timely tax and super payments by employers.

Final Thoughts

The 2025–26 Federal Budget offers modest but meaningful changes that could affect your tax position, retirement strategy, and everyday expenses. While many measures are still proposals, now is the time to plan.

For more information, please visit the official Australian Government Budget website here: Budget.gov.au | Budget 2025–26.

Need help interpreting how these changes apply to you?
Let’s talk about your goals and how to make the most of these updates in your financial plans.