2025 Federal Budget: What does it mean for Employers and Employees?

This is his fourth federal budget as Treasurer, and one which is set to lay the groundwork for the upcoming federal election campaign later this year.

The 2025 Budget had similar priorities to last year’s budget, in relieving nationwide cost of living pressures, strengthening Medicare, investing in education, building more homes and creating a more productive and resilient economy.

Here is our wrap-up of the Australian Federal Budget for CFOs (Chief Financial Officer), HR (Human Resources), and Payroll leaders.

Tax Cuts

Just over 12 months after the government announced its decision to rethink the Stage 3 Tax Cuts, the budget announced new tweaks to the tax rate. The revised rates will decrease employee income tax, potentially leading to higher take-home pay.

The $18,201 to $45,000 income threshold will see the tax rate cut from 16% to 15% after 1 July 2026, which will be lowered further to 14% from 1 July 2027.

Employers will need to reassess their payroll tax rates and make necessary adjustments to ensure compliance with the revised tax rates.

2025 - 2026
Taxable income	Tax Rates (%)
$0 - $18,200	Nil
$18,201 - $45,000	15
$45,001 – $135,000	30
$135,001 – $190,000	37
$190,001 and over	45

Superannuation Payments

Unusually the federal budget 2025 made no changes to the superannuation rules, however, the employer superannuation guarantee rate will increase to 12% from 1 July 2025 as expected.

Concessional and non-concessional superannuation contributions will not be indexed, so these caps will not change for the 2025-26 financial year:

The concessional contributions cap: $30,000
The non-concessional contributions cap: $120,000.

Payday Super - Update

The Budget papers make note of the support provided by the government to the ATO (Australian Taxation Office) to work closely with the industry and stakeholders on the Payday superannuation policy; ensuring that all Australian employees are paid their SG contributions concurrently with their salaries and wages. This will become a requirement from 1 July 2026, a revision from the current requirement to pay SG contributions quarterly.

Payday Super is good for business as it allows employers to pay the Superannuation Guarantee together with an employee's wage, allowing workers to track their entitlements more easily. This enables businesses to streamline payroll management and reduce their liabilities.

Student Debt Relief

The budget announced that for university graduates with a HECS or HELP student debt, there will be a 20 per cent reduction, that will be subject to legislation coming into effect.

With these changes, around $16bn in student debts will be cut from the loan accounts of 3 million Australians.

This reduction is welcomed by students struggling to pay off their loans. It will also reduce the burden on the government, which will have to pay less interest on its debt. Additionally, it will relieve the economy, as less student debt means more money to spend on goods and services.

Pay Changes for the Care Sector

The budget detailed further pay rises for aged care nurses, with an allocation of $1.6 billion. The total investment into wage increases in the sector has now increased to $17.7 billion.

Furthermore, an extra $3.6 billion will be invested in wage increases for early childhood education and the care workforce, which amounts to around a 10% increase in the modern award rates from December 2024, and an additional 5% from December 2025.

Health

In this budget, there was a record investment of $7.9 billion, to provide more bulk billing for Australians to be able to see their GP for free. This is the single largest Medicare investment since it was created over four decades ago.

The Bulk Billing Incentive Program is being established by the government to incentivise general practices to become fully bulk billed, aiming to boost the amount of fully bulk billed practices to around 4,800 nationwide by 2028-2029.

The budget also provided significant investments to support more junior doctors training to be GPs, with up to 400 new places encouraging 2,000 more doctors entering GP training every year from 2028.

Future Skills and Education

The Free TAFE initiative which commenced in January 2023 and ended in September 2024 will be invested in further. This initial period saw close to 600,000 enrolments in Free TAFE courses across priority areas in the economy.

The new investment, handed down as part of this budget, will make 100,000 permanent Free TAFE place every year from 1 January 2027, subject to legislation passing. This will ease ongoing cost-of-living pressures for students and encourage them to train in priority sectors and secure rewarding employment in their chosen field.

Equal Opportunity

As part of its commitment to gender equality, the government pledged $21.4 million over a three-year period from 2025-26 to improve victim and survivor engagement in the justice system.

To support stronger outcomes for First Nations Australians, the government will invest $1.3 billion over a six-year period from 2024-25 as part of this budget, including the establishment of a place-based business coaching and mentoring program for First Nations businesswomen and entrepreneurs.

Non-Compete Clauses

The federal government announced a ban for non-compete clauses, which aims to boost competition and remove barriers for employees starting up their own businesses.

Within the budget papers, this initiative was said to create freedom for many Australian workers, including childcare centre staff, construction workers and hairdressers.

The policy is designed to come into effect from 2027 for workers earning less than $175,000 a year (the high-income threshold).

No Sight of Instant Asset Write Off

The $20,000 instant asset write-off for small businesses was nowhere in sight this year.

Initially a COVID-stimulus measure, it was originally extended in the 2023 Federal Budget, and then further extended in the 2024-25 budget. However, it is seemingly in limbo heading into the election cycle.