2025-26 Federal Budget: Individuals

Personal income tax cuts proposed

The marginal tax rate for the personal income tax threshold bracket from $18,201 to $45,000 will be reduced from 16% to 15% from 1 July 2026, and further reduced to 14% from 1 July 2027.

The applicable marginal tax rates and income thresholds for recent income years, as well as the proposed new rates, are depicted in the table below.

Personal income tax rates and thresholds 

Source: Budget Paper No 2, p 5; Budget Factsheet — New tax cuts for every Australian taxpayer, p 1; Prime Minister and Treasurer, “New cost of living tax cuts under Labor” [joint media release], 25 March 2025.

Medicare levy low-income thresholds to be increased

The Medicare levy low‑income thresholds for singles, families, and seniors and pensioners will be increased from 1 July 2024.

The threshold for singles will be increased from $26,000 to $27,222. The family threshold will be increased from $43,846 to $45,907. The threshold for single seniors and pensioners will be increased from $41,089 to $43,020. The family threshold for seniors and pensioners will be increased from $57,198 to $59,886. The family income thresholds will increase by $4,216 for each dependent child or student, up from $4,027.

The applicable thresholds for 2023–24 and 2024–25 are depicted in the tables below.

Medicare levy low-income thresholds 2023–24

* The Medicare levy phases in at 10 cents for each dollar above the relevant low-income threshold until the full Medicare levy at 2% applies. This column shows the level of income at which the levy begins to be paid in full.

Medicare levy low-income thresholds 2024–25

*The Medicare levy phases in at 10 cents for each dollar above the relevant low-income threshold until the full Medicare levy at 2% applies. This column shows the level of income at which the levy begins to be paid in full.

Source: Budget Paper No 2, p 5; Budget Factsheet — New tax cuts for every Australian taxpayer, p 1.

Higher education loan repayment changes

The government will reduce all outstanding Higher Education Loan Program (HELP) and other student debts by 20%, before indexation is applied on 1 June 2025. The cut will remove a total of $16 billion in debt. 

The student loan repayment system will also be reformed from 1 July 2025 by moving to a marginal repayment system with a higher minimum repayment threshold. The minimum repayment threshold is proposed to increase from $54,435 in 2024–25 to $67,000 in 2025–26. 

Both these reforms (which were previously announced in November 2024) will be subject to the passage of legislation.

Source: Budget Paper No 1, p 22; Budget Factsheet — Building Australia’s Future, pp 17 and 37; Minister for Education, “Building a better and fairer education system to support a stronger economy” [media release], 25 March 2025; Making HELP and student loan repayments fairer and 20% reduction of student loan debt, Department of Education website.

Start date deferred for measure to strengthen foreign resident CGT regime 

The start date for the 2024–25 Budget measure to strengthen the foreign resident capital gains tax (CGT) regime will be deferred from 1 July 2025 to the later of 1 October 2025 or the first 1 January, 1 April, 1 July or 1 October after assent of amending legislation. 

The 2024–25 Budget proposed to: 

• clarify and broaden the types of assets that foreign residents are subject to CGT on;
• amend the point-in-time principal test to a 365-day testing period; and
• require foreign residents disposing of shares and other membership interests exceeding $20 million in value to notify the ATO prior to the transaction being executed (this notification process is intended to improve oversight and compliance with foreign resident CGT withholding rules where a vendor self-assesses their sale as not being taxable real property).

The start date for the measure has been deferred from 1 July 2025 to the later of 1 October 2025 or the first 1 January, 1 April, 1 July or 1 October after the amending legislation receives assent. 

Source: Budget Paper No 2, p 4.

Restrictions on foreign ownership of housing

Measures will be introduced to ensure foreign investment in housing supports the government’s broader agenda to boost Australia’s housing supply by:

• banning foreign persons (including temporary residents and foreign‑owned companies) from purchasing established dwellings for 2 years from 1 April 2025, unless an exception applies (exceptions to the ban will include investments that significantly increase housing supply or support the availability of housing on a commercial scale, and purchases by foreign‑owned companies to provide housing for workers in certain circumstances);
• providing the ATO with funding over 4 years from 2025–26 to enforce the ban; and
• providing the ATO and Treasury with funding from 2025–26 to implement an audit program and enhance their compliance approach to target land banking by foreign investors.

The enhanced compliance approach by the ATO and Treasury to target land banking will ensure foreign investors comply with requirements to put vacant land to use for residential and commercial developments within reasonable timeframes.

Source: Budget Paper No 2, p 6.