Unless you’ve been living under a rock, you’ll no doubt have seen at least some of the coverage from the government’s latest budget.
After all, it’s the biggest drop of the financial year. All the nerds (including us) have been talking about it nonstop!
But you might be wondering, what’s in it for you (and your business!) specifically? Well, the short answer is: quite a lot. From measures to ease the high cost of living, to a campaign to buy local, to tax cuts (again!), there’s quite a bit to wade through.
To help make heads and tails of it all, we’ve taken all the big promises and broken them down by category, so you can skip straight to the bits that mean most to you. Let’s get this party started!
Key:
✅ – Already legislated
🟨 - Coalition has agreed to match
(Everything else is a proposal only at this point in time.)
A quick overview
Every year, the federal government releases their annual budget, which is basically a spending plan that sets out their priorities and promises for the year ahead.
What makes this budget so special though is that we’re currently in an election year. This is one of the few last chances for the current government to woo potential voters, which is why it’s chock-a-block with a little something for everyone.
Another important thing to note is how the planned spending is set to affect Australia’s deficit – that is to say, when the amount the government is projected to spend is more than the money it earns through tax revenue. Because of the tax cuts already implemented last year, on top of the tax cuts now promised for future financial years, the deficit is set to increase beyond what was previously predicted, to about $27.6 billion in 2026/27, and a further $42.1 billion in 2027/28.
While that sounds like a lot, this isn’t necessarily a bad thing, if the promised spending results in good outcomes for the country. There’s always a potential to regain a surplus (when the government earns more than it spends) down the track. An argument could be made that because of the current high cost of living, extra spending to boost productivity is necessary – but it’s for voters to decide if they agree with the direction the government is heading in.
So, let’s take a quick look at the big things promised in this year’s budget, as we accelerate towards the election now set for May 3rd 2025.
The tax stuff
Tax cuts ✅
Again, you might be asking? Yes, again!
Despite the stage three tax cuts having just gone live on the 1st of July 2024, the government has just legislated a further tax cut over two future financial years, primarily aimed at lower income earners.
What is currently the 16% threshold will lower to 15% in 2026/27, and then 14% in 2027/28
| Income band | Current tax rate | Proposed 2026/27 | Proposed 2027/28 |
|---|---|---|---|
| $0 - $18,200 | 0% | 0% | 0% |
| $18,201 - $45,000 | 16% | 15% | 14% |
| $45,001 - $135,000 | 30% | 30% | 30% |
| $135,001 - $190,000 | 37% | 37% | 37% |
| $190,001+ | 45% | 45% | 45% |
What this means in practice is that you’ll pay a cent less in tax for every dollar you earn between $18,201 and $45,000 in FY 2026/27. And then another cent less per dollar again, the financial year after that.
For those of you earning above $45,000, this will essentially save you $268 in 2026/27, and $536 in 2027/28 (in comparison with the current tax rate settings).
That’s roughly the cost of a cup of coffee a week, which is why some people are cheekily calling this proposal the “coffee tax cut”.
In contrast, the Liberal party have vowed to reverse these tax cuts should they get into power, replacing them with a fuel excise cut instead.
HECS forgiveness, and potential marginal rates
If you have an oversized student loan that you worry you’ll never be able to pay off (we feel you) – this one’s for you.
The government has proposed reducing outstanding student loan balances by 20%. So for example, if you have a current student loan balance of $100,000 (oof), it would be reduced to $80,000 if this measure goes into effect.
But that’s not the only change proposed – this budget outlines a plan to change the student loan repayment calculation from one that uses an income-level-based flat rate, to a marginal system more in line with our progressive tax rate system.
Yeah, we know, that’s a lot of jargon. Basically, in the current system, once you hit the repayment threshold ($54,435 for FY 2024/25), you start paying a flat-rate percentage of all your income towards your student loan. For example, if you earn $60,000, you’d be in the 1% bracket meaning you’d owe 1% of all your income ($600).
What this change would mean is that you would only pay the set percentage on income within that income bracket, rather than all your income. At this point in time, the new proposed repayment threshold is $67,000, and your compulsory repayments will be calculated only on income above $67k.
You’ll owe 15% of every dollar from $67,000 to $124,999, and an additional 17% of every dollar above $125,000. Tada!
| Income band | Repayment percentage on that income |
|---|---|
| $0 - $67,000 | 0% |
| $67,001 - $124,999 | 15% |
| $125,000+ | 17% |
💡 Don’t forget – this is all on top of recent changes to how HECS loans are indexed. If you missed that piece of good news, we’ve covered it all in our HECS loans update.
💡 If you need a refresher on how student loan repayments work, no worries! Check out our guide to student loan repayments.
Instant asset write off ✅
Calling everyone who hates calculating depreciation! So, like, everyone.
The instant asset write off of $20,000 proposed for FY2024/25 has now been legislated. This means you can claim a straight tax deduction for any eligible business asset you purchased this year, instead of having to claim the depreciation.
No word yet what the threshold will be for FY2025/26, but we’ll keep you updated as soon as we know.
💡 No idea what the heck we’re talking about? We explain everything in our guide to depreciation.
Medicare levy low-income thresholds
The Government will increase the Medicare levy low‑income thresholds by 4.7 per cent for singles, families, and seniors and pensioners, and backdate this change to apply from the 1st of 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.
This means that Australians on lower incomes will continue to be exempt from paying the Medicare levy or continue to pay a reduced levy rate.
💡 Need a reminder on what the Medicare levy is? Check out our detailed guide to all things Medicare.
Living expenses
Energy bill relief extension 🟨
The government has proposed extending their current energy bill relief measures. The plan is for every household to receive an additional $150 this year in energy rebates, split into $75 a quarter for the second half of 2025.
The even better news is that a million small businesses (including sole traders) will also be eligible for this rebate. Whoo!
Not to mention that the Liberals have agreed to see this one through as well, should they be elected. So no matter who wins, Aussies get an energy rebate.
Further Medicare investment 🟨
You know how doctors appointments have been getting expensive recently? Well, the government is planning to make things more affordable by investing $7.9 billion into the Medicare system, so more Australians get GP visits for free.
In theory, this means that 9 out of every 10 doctors appointments will be covered by Medicare and bulk billing.
Again, the Liberals have said they would also implement this policy, meaning it’s happening no matter what.
Housing policy
The government plans to expand the Help to Buy program by increasing property and income caps.
They’ll make the scheme available to individuals who earn up to $100,000, or joint buyers earning $160,000 collectively.
Childcare
Parents will now be able to access a guaranteed three days of subsidised childcare, no matter how many hours a week they spend working or studying.
As recommended by the Productivity Commission, the current activity test used to calculate how many hours you’re eligible for will be scrapped. Instead, the policy will be made available to all families earning below the $533,280 annual threshold.
PBS medication cap
For those who buy medication through the Pharmaceutical Benefits Scheme, they’ll be capped at $25 a prescription (it’s currently $31.60). Both major parties have agreed to this, so it’ll go through no matter who the next government is.
Business initiatives
“Buy Australian” campaign
The government has committed $20 million to a “Buy Australian” campaign. Wait, what?
While $20 million isn’t much in the grand scheme of things, it’s indicative of concern around potential economic turbulence due to… certain international factors.
If this blows up in the future, it could be worth keeping in mind for future marketing efforts. After all, what’s more “Buy Australian” than products made by bonafide Aussie sole traders?
Raise for aged care workers
This one’s specifically for employees – but could affect pricing for sole traders in the industry.
The government has pledged to raise wages for around 60,000 nurses working in aged care, translating to about an extra $430 a week. Something to keep in mind when figuring out the cost of your own services!
Incentives for tradies
In a bid to boost the construction industry, eligible apprentices will get up to $10,000 in incentive payments, provided they train up in housing construction. (The current cash bonus is $5,000.)
The government also plans to put together a national electrical licensing scheme, which will make it easier for tradies in the industry to move and work across the country. Should this go into effect, it could save these tradies a lot of time and money by allowing them to go where the jobs are without having to jump through as many hoops.
Alcohol excise relief
Good news for those of us who like to drink! So, like, most people.
If you’ve noticed that beer has been getting more expensive, it’s not in your head – it’s because the excise (tax) on alcohol is indexed to inflation, meaning that as costs rise, so does the excise.
The government is pledging to pause indexation for two years, starting August 2025. In theory, this will help stop beer from getting more expensive (and hopefully result in more sales for sole trader brewers).
They’re also planning to increase caps under the existing excise remission scheme for wine producers, from $350,000 to $400,000, starting 1st July 2026. Great news!
Slashing of consultant/contractor spending
Labour essentially plans to rebuild the public service by, in part, saving on consultants and contractors.
If you’re a contractor in the public space, this isn’t the best news – the reprioritised spending will mean that there are fewer jobs to go around. Sorry!
ATO gets $1 billion – well, almost
In bad news for tax avoiders and fraudsters everywhere, the ATO may receive an additional $999 million to expand their tax compliance initiatives. Yikes!
It’s never a good idea to try to trick the ATO, but it’s definitely not in your best interests now.
Which is why we (very biasedly) recommend that all sole traders make triple sure they’re always compliant with their tax obligations, by using Hnry to sort your taxes.
Using Hnry to sort your taxes
We’re not going to lie, we’re completely biased. Even so, we reckon Hnry is the best possible option for sole traders to sort their taxes.
That’s because we essentially do it all for you. For just 1% +GST of your self-employed income, capped at $1,500 +GST annually, we automatically calculate, deduct, and pay all your tax, levies, and whatnot for you, including:
- Income tax
- GST (if applicable)
- Medicare levy
- Student loan repayments
- Superannuation contributions (optional)
We also complete and lodge your income tax returns and BAS lodgements for you, at no extra cost. It’s all part of the service!
Not to mention the Hnry app, which you can use for all your financial admin. Unlimited invoices, unlimited quotes, a real-time dashboard tracking your yearly profit, and we manage your expenses for you. Too easy!
If this sounds good to you, what are you waiting for? Join Hnry today, and never think about tax again!
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