Jim Chalmers delivered his fourth Federal Budget on 25th March 2025, and once again “cost-of-living measures” took centre stage. With an election just around the corner, the government will be hoping income tax cuts, energy bill relief and cheaper healthcare will win votes from Aussie battlers. The government estimates that the measures will benefit the average household by around $15,000 over 4 years.
The Treasurer’s speech contained a mix of optimism around Australia’s economy and pessimism around global uncertainty. He cheered on Australians for getting through the inflation spikes of recent years, the private sector for now driving GDP growth and the economy for ‘turning a corner’.
The Treasurer suggests the Australian economy is on track for a soft landing. Inflation is predicted to be in the RBA’s target band around the middle of 2025, 6 months earlier than previously predicted, interest rates have peaked, unemployment remains low and wages and living standards are rising again.
However, with trade wars, actual wars and slowing growth happening around the world, there are still big questions over how reliable the budget projections can be in both the short and medium term.
Readers will be pleased to know there was no further tinkering of the super rules, so we’ve focused our coverage on key announcements around the cost-of-living measures and those that affect seniors.
Key announcements
Income tax cuts
The Government announced further income tax cuts for all Australian taxpayers, starting next year and the following.
- From 1 July 2026, the 16% tax rate, which applies to taxable income between $18,201 and $45,000, will be reduced to 15%
- From 1 July 2027, this tax rate will be reduced further to 14%.
For any worker earning more than $45,000 this equates to a tax cut of $268 in 2026-27 and $536 per year from 2027-28, compared to 2024-25 tax rates.
Medicare levy threshold increased
The Government will also increase the Medicare levy low-income thresholds by 4.7% for singles, families, and seniors and pensioners from 1 July 2024. This means more than 1 million Australians on lower incomes will continue to be exempt from the Medicare levy or continue to pay a reduced levy rate.
The changes are detailed in the table below:
| 2023-24 Low-income threshold (above which levy begins to phase in) | 2023-24 Full Medicare levy (2%) applies above* | 2024-25 Low-income threshold (above which levy begins to phase in) | 2024-25 Full Medicare levy (2%) applies above* | |
|---|---|---|---|---|
| Singles | $26,000 | $32,500 | $27,222 | $34,027 |
| Single Seniors and Pensioners | $41,089 | $51,361 | $43,020 | $53,775 |
| Families (not eligible for Seniors and Pensioner Tax Offset) | $43,846 (plus $4,027 for each dependent child) | $54,807 (plus $5,034 for each dependent child) | $45,907 (plus $4,216 for each dependent child) | $57,383 (plus $5,270 for each dependent child) |
| Families (Senior and Pensioner) | $57,198 (plus $4,027 for each dependent child) | $71,497 (plus $5,034 for each dependent child) | $59,886 (plus $4,216 for each dependent child) | $74,857 (plus $5,270 for each dependent child) |
* 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 it begins to be paid in full.
Energy bill relief
The Government is extending energy bill relief by $150 for the second half of 2025. Every household and around 1 million small businesses will receive two $75 rebates automatically off their electricity bills – the credits don’t need to be applied for.
This is in addition to the $300 going to households in energy bill relief between 1 July 2024 and 30 June 2025.
Cheaper healthcare
The Government is lowering the maximum cost of medicines on the Pharmaceutical Benefits Scheme (PBS) for everyone with a Medicare card and no concession card. From 1 January 2026, the maximum co-payment will be lowered from $31.60 to $25.00 per script, and remain frozen at $7.70 for pensioners. 4 out of 5 PBS medicines will become cheaper for general non-Safety Net patients, with larger savings for medicines eligible for a 60-day prescription.
$1.8 billion is also being invested to list new medicines on the PBS – including new oral contraceptives and treatments for endometriosis, lymphoma and menopause.
Additionally, the government has pledged $7.9 billion in a bid to make 9 out of 10 GP visits bulk billed by 2030.
Deeming rates remain frozen
Deeming rates have been frozen at the following rates for several years while interest rates were low.
- 0.25% for the lower rate
- 2.25% for the upper rate
Previously any continuation of the freeze has been mentioned in the Budget papers, and in last year’s papers it was announced that they would remain frozen until 30 June 2025. This year they were not mentioned in the Budget papers, but a representative from the Department of Social Services confirmed that they remain frozen for another year, although this may be changed by the Minister at any time.
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