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Little certainty on budget measures leading into an election.
Continued uncertainty following pre-election budget
03 April 2025
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14 minute read
What else could we have expected?
The federal budget 2024–25 was delivered by Treasurer Jim Chalmers on 25 March 2025, just days out from the 3 May election being called by Prime Minister Anthony Albanese. Final notice of the budget was a little over two weeks out, and the budget papers were briefer than usual, perhaps reflective of the imminent election. Given this, the Treasurer’s fourth budget was never going to be particularly controversial and, unsurprisingly, contained few mentions of tax.
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The expected focus of the budget confirmed cost-of-living support, improved access to healthcare and housing, investment in education and strengthening the economy are front and centre for the government.
But two questions emanate from the budget:
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How will we pay for it all?
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Will a government ever commit to serious, overdue, holistic tax reform of a system that everyone can see is creaking under its own weight?
As emphasised in nearly every Intergenerational Report (a Treasury publication that outlines anticipated trends and future challenges), expenditures aimed at addressing the requirements of our ageing population are projected to rise, while tax revenues are likely to remain stable or decline. This situation is unsustainable.
It takes little effort to compile a long list of the challenges and issues that contribute to the inefficiencies and complexities in our tax and superannuation system. It takes tremendous commitment to openly have a sensible, bipartisan conversation about the solutions to address the mounting challenges we have in our system and to undertake the necessary reforms (whatever their form).
While the government’s policy agenda has been laid out, the unenacted budget measures (discussed below) are contingent on the government being re-elected and the passage of enabling legislation through the new Parliament. The unenacted budget measures will hang in the balance until the new government is formed and its priorities are laid down. Of course, the composition of the House of Representatives and the Senate post-election is also, at present, unclear.
Snapshot of the fiscal position
Fiscal challenges remain far into the future, with the budget revealing:
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A forecast deficit of $42.1 billion for 2025–26 and deficits of $35–37 billion each year thereafter to 2028–29.
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Gross debt tipped to exceed $1 trillion for the first time in 2025–26, rising to $1.223 trillion by 2028–29, resulting in net interest payments of nearly $95 billion over the forward estimates.
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Inflation (CPI) is expected to be 3 per cent for 2025–26 then stabilise at 2.5 per cent from 2026–27 to 2028–29.
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The unemployment rate will remain at 4.25 per cent through to 2028–29.
What was announced?
Further regulation of tax practitioners
The budget contained details of more reforms aimed at enhancing the integrity of the tax profession through strengthening the Tax Practitioners Board (TPB) sanctions regime (from 1 July 2026) and modernising the registration framework for tax practitioners (from 1 July 2027). The budget Papers clarified the measures the government will proceed with and those it will not pursue.
In particular, the government will:
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Proceed with:
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Reintroducing criminal penalties for unregistered preparers.
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Broadening civil penalties in the Tax Agent Services Act 2009 (TASA), to enable the TPB to apply to the Federal Court for civil penalties for breaches of the Code of Professional Conduct by registered tax practitioners, and for false or misleading statements made by unregistered preparers.
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Introducing infringement notice penalties for alleged contraventions of the TASA.
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Introducing enforceable voluntary undertakings.
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Increasing the maximum period a terminated practitioner is banned from reapplying for registration from five to 10 years.
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Not proceed with:
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Mandating a specific ratio of registered practitioners within entities that are registered as tax agents.
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Removing the professional association accreditation and registration pathways.
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Requiring in-house tax advisers, secondees and lawyers to register with the TPB.
Further consultations are expected after the election.
More tax cuts for individual taxpayers
Most did not see further tax cuts coming, although perhaps not surprising given the forthcoming election. The tax cuts are framed as providing more cost-of-living relief and returning some bracket creep, although the modest reduction in tax does not fully address the impact of inflation pushing people’s income into higher tax brackets over time. These cuts are on top of the previous stage three tax cuts that took effect from 1 July 2024.
The tax cuts reduce the:
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The 16 per cent rate to 15 per cent from 1 July 2026.
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The 15 per cent rate to 14 per cent from 1 July 2027.
Compared to the 2024–25 settings, every Australian taxpayer earning:
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Between $18,200 and $45,000 will get a further tax cut of up to $268 in each of 2026–27 and 2027–28 (up to just over $5 per week).
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More than $45,000 – around 80 per cent of taxpayers – will get a further tax cut of $268 in each of 2026–27 and 2027–28 (just over $5 per week).
Enabling legislation was introduced the day after the budget and promptly passed by both houses, before being enacted on 27 March 2025. Accordingly, the tax cuts are now law for 2026–27 and 2027–28. However, as these changes do not apply before 1 July 2026, the impact of the tax cuts to alleviate pressure on taxpayers will not be apparent for more than 12 months. Further, tax liabilities or income tax returns for the 2025–26 income year are not impacted.
Medicare levy low-income thresholds
The annual indexation of the Medicare levy low-income thresholds has been legislated with effect from 1 July 2024. These unremarkable changes ensure that low-income individuals continue to be exempt from paying the Medicare levy or pay the levy at a reduced rate.
Energy Bill Relief Fund extension
The budget extends the federal budget 2024–25 measure, Energy Bill Relief Fund – extension and expansion, until 31 December 2025 to provide cost-of-living relief. Additional rebates of $75 per quarter (totalling $150) will be provided to every household and around one million small businesses to reduce energy bills. The rebates will be automatically applied to electricity bills in two quarterly instalments.
Small business instant asset write-off threshold finally extended
You may have missed the fleeting reference in the budget papers (in the Small Business statement) where the government reaffirmed its commitment to extending the temporary increase in the small businesses instant asset write-off (IAWO) threshold, announced as part of the federal budget 2024–25.
It has taken nine months into this income year to have certainty, but the enabling legislation finally passed Parliament on 26 March 2025 and was enacted the following day. The $20,000 IAWO threshold for 2023–24 has now been extended by an additional 12 months, until 30 June 2025. This means that businesses with an aggregated turnover of less than $10 million can immediately deduct eligible assets costing less than $20,000 in 2024–25.
Further legislative amendments will be needed to prevent the IAWO threshold reverting to $1,000 from 1 July 2025 (noting the budget did not contain an announcement on the threshold for 2025–26). The Coalition has stated that, if elected, it would increase the threshold to $30,000 and make it permanent.
International tax measures
Capital gains tax for foreign residents
As part of the federal budget 2024–25, the government announced that it would:
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Clarify and expand the range of assets on which foreign residents are subject to capital gains tax.
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Modify the principal asset test from a point-in-time to a 365-day testing period.
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Require foreign residents disposing of shares or other membership interests worth more than $20 million to notify the ATO before the transaction is executed.
A consultation paper on this measure was released on 23 July 2024. In the budget, the government announced that it will defer the start date of this measure from 1 July 2025 to the later of 1 October 2025 or the first 1 January, 1 April, 1 July or 1 October after enactment of the enabling legislation. While the budget reaffirmed the government’s commitment to progressing this measure, linking the application date to the date of Royal Assent defers the measure indefinitely.
Managed investment trusts
The tax treatment of managed investment trust arrangements will be clarified, ensuring legitimate investors can continue to access concessional withholding tax rates in Australia while preventing misuse, as outlined in Taxpayer Alert TA 2025/1. Once legislated, this measure will apply to fund payments from 13 March 2025.
In the budget, the government also announced that it would defer the start date of the Extending the Clean Building Managed Investment Trust withholding tax concession measure (announced in the federal budget 2023–24) from 1 July 2025 to the first 1 January, 1 April, 1 July, or 1 October after enactment of the enabling legislation. Again, the government’s commitment to progressing this measure is fettered by linking the application date to the date of Royal Assent.
Additional funding for the ATO
The government will provide $999 million over four years to the ATO to extend and expand tax compliance activities. This funding includes:
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$717.8 million for a two-year expansion and a one-year extension of the Tax Avoidance Taskforce which scrutinises tax compliance among multinationals and other large taxpayers.
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$155.5 million to extend and expand the Shadow Economy Compliance Program to reduce shadow economy behaviour.
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$75.7 million to extend and expand the Personal Income Tax Compliance Program.
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$50 million to extend the Tax Integrity Program which focuses on the timely payment of tax and superannuation liabilities.
Restricting foreign ownership of housing
The budget proposed a restriction on foreign investment in housing in Australia to enable Australians to buy homes. The ban will prevent foreign persons (including temporary residents and foreign-owned companies) from purchasing established dwellings for two years from 1 April 2025, unless an exception applies. The ATO will be provided with funding to enforce the ban.
Support for the hospitality sector and alcohol providers
The hospitality sector and alcohol providers, including brewers, distillers and wine producers, will benefit from:
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A pause in indexation of the draught beer excise and excise equivalent custom duty rates for two years from August 2025 until August 2027; and
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An increase in the excise remission cap under the Remission Scheme for eligible brewers and distillers, and the Wine Equalisation Tax rebate cap for wine producers, from $350,000 to $400,000 per financial year from 1 July 2026.
What was not mentioned in the budget?
ABUMs
Unfortunately, the budget provided no clarity on some key announced but unenacted measures (ABUMs), including:
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Reforming the corporate tax residency rules;
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Modernising the individual tax residency rules;
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Relaxing the self-managed superannuation fund residency requirements;
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Reforming Division 7A (noting the Commissioner has recently sought special leave to appeal the decision in Commissioner of Taxation v Bendel [2025] FCAFC 15 to the High Court); and
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Consulting on the FBT treatment of car parking benefits (noting the Commissioner has recently appealed the decision in Toowoomba Regional Council v Commissioner of Taxation [2025] FCA 161 to the Full Federal Court).
Some of these ABUMs stem back many years, leaving practitioners and taxpayers in limbo. The continuing uncertainty hampers commercial decision-making and economic growth. Addressing the long list of ABUMs to either abandon or reaffirm commitment to progressing each one, together with a realistic time frame for implementation, should be a priority of the new government.
Status of unenacted key superannuation measures
Finally, while the budget contained no specific superannuation measures, the government remains committed to:
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Introducing new Division 296 (into the Income Tax Assessment Act 1997) with effect from 1 July 2025 which would tax at 15 per cent the earnings attributable to the part of an individual’s total superannuation balance that exceeds $3 million. The proposed taxation of unrealised gains is concerning and would set a dangerous precedent. The Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023, containing this measure, is before the Senate and will lapse immediately before the new Parliament commences.
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Implementing payday super from 1 July 2026 – a package of exposure draft legislation, draft regulation and accompanying draft explanatory materials was released on 14 March 2025. Submissions are due by 11 April 2025.
The fate of these significant measures remains unclear.
About the Author
Robyn Jacobson is the senior advocate at The Tax Institute.
About The Tax Institute
The Tax Institute is the leading forum for the tax community in Australia. Our reach includes membership of over 10,000 tax professionals from commerce and industry, academia, government and public practice and 40,000 Australian business leaders, government employees and students. We are committed to representing our members, shaping the future of the tax profession and continuous improvement of the tax system for the benefit of all, through the advancement of knowledge, member support and advocacy. Read more at taxinstitute.com.au
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