Analysis
25 Mar 2025
5 minute read
Australian Federal Budget 2025 – 26
A platform for the next election
The Federal Treasurer, Jim Chalmers, handed down the 2025-26 Budget on 25 March 2025. Released on the eve of a federal election, this Budget was an opportunity for the Australian Government to launch its pitch for a second term.
The Budget reveals that an underlying cash deficit of $27.6 billion is estimated for 2024-25, a $0.7 billion downgrade compared to the expectation in the Mid-Year Economic and Fiscal Outlook (MYEFO) in December 2024. Over the five years to 2028-29, the forecast of the underlying cash balance has improved by a cumulative $1.6 billion. However, that improvement is modest in the context of the decade of deficits expected until 2034-35.
The centrepiece of the 2025-26 Budget is new personal income tax cuts for all Australian taxpayers, which will see the lowest marginal tax rate decline from 16% to 14% over two years. Starting on 1 July 2026, the tax cuts will cost $17.1 billion over three years from 2026-27. As a result of this change, a worker on average earnings will receive a new tax cut of $268 in 2026-27, rising to $536 per year in 2027-28 compared to 2024-25 tax settings.
Some of the other key items outlined in the Budget include:
- Additional energy bill relief for all Australian households and one million eligible small businesses, providing an extra $150 in the second half of calendar year 2025.
- A material downgrade in tobacco excise receipts of $6.9 billion over five years to 2028-29, despite an injection of $156.7 million into additional compliance and enforcement action in relation to the illicit trade in tobacco and nicotine products.
- Two new priorities under the existing National Competition Policy reforms to ban non-compete clauses for low- and middle-income workers and design a national licencing system for electrical trades.
- Pausing indexation of draft beer excise and excise equivalent customs duty rates for a two-year period, from August 2025, at a cost of $165 million over five years.
- Strengthening Medicare by allocating additional funding of $8.4 billion over five years from 2024-25.
Watch the Federal Budget webinar
David Watkins
Deloitte - Australia
David Watkins is the leader of the Deloitte Australia Tax Insights & Policy group. David has over 25 years’ experience in corporate income tax and international tax covering a wide range of tax issues across various industry sectors. David has worked in Malaysia, Singapore and New York. In his current role, David’s focus is on emerging tax developments and in particular, the Australian tax reform debate and the international process addressing Base Erosion & Profit Shifting (BEPS). The Tax Insights & Policy group is involved at various stages in these emerging issues including consultation and submissions, publications and presentations and assessing the impacts of tax law changes.
Dr Pradeep Philip
Deloitte - Australia
Pradeep is the Lead Partner for Deloitte Access Economics. He has had a long and successful career in public policy, with deep expertise in economics and proven leadership experience. Pradeep has been a senior bureaucrat, working at the highest levels of public policy, across three jurisdictions in Australia. Pradeep’s experience includes: Director of Policy in the Prime Minister’s office, Secretary of the Department of Health and Human Services in Victoria, CEO of LaunchVic – a company established by the Victorian Government to promote start-ups and entrepreneurship – and Associate Director General of the Department of Premier and Cabinet in Queensland. He holds a PhD in Economics and Bachelor of Economics (Hons) from the University of Queensland.
Sharon Murray
Deloitte - Australia
Sharon is an Australian Legal Practitioner who has experience dealing with corporate transactions, capital market transactions and disputes involving large corporate groups. Sharon joined Deloitte following her role at the ATO as an Assistant Commissioner dealing with significant technical risks for tax administration. Her experience includes advising on all stages of the dispute cycle with a focus on client initiated early engagement enabling clients to achieve certainty and thus preventing further disputes. She has experience dealing with large market transactions, the digital economy, private equity and cross-border transactions.
Stephen Smith
Deloitte - Australia
Stephen is an experienced macroeconomist and Partner of Deloitte Access Economics. He leads the Macroeconomic Policy and Forecasting Group of Deloitte Access Economics, setting the firm’s house view on the Australian economic outlook. As the author of several Deloitte Access Economics subscription publications – including the flagship Business Outlook report – Stephen provides clients and subscribers with a detailed understanding of the Australian and global economic environment. He is a regular media commentator on economic issues and presents to Board and Executive audiences at many of Australia’s leading corporates. Stephen’s client work spans a broad range of topics including trade, tax and fiscal policy, residential property, financial markets, M&A transactions, productivity, economic reform, and international development. He is an expert in understanding, forecasting and communicating the outlook for the Australian economy, having spent the past two decades working at Access Economics and Deloitte Access Economics. From 2016 until 2019 he was the Lead Partner of Deloitte Access Economics with responsibility for managing the practice. Based in Canberra, Stephen holds a Master of International and Development Economics, along with undergraduate qualifications in economics, from the Australian National University.
Cathryn Lee
Deloitte - Australia
Cathryn is a Partner in the Macroeconomic Policy and Forecasting team of Deloitte Access Economics. Cathryn has extensive experience as an economist in both the public and private sectors, having joined Deloitte Access Economics from the Commonwealth Treasury in 2016. Cathryn has a detailed understanding of the Australian economy, and expertise in economic forecasting and analysis. Cathryn has provided advice to government and private sector clients on a range of macroeconomic issues covering the Australian and global economies. Cathryn specialises in providing economic forecasts and advice for mergers and acquisitions, government budget and tax policy, international trade, and financial markets.
