Budgeting for the Ballot: Reform Left on the Table

28 March 2025

This year’s federal Budget walks a tightrope between cost-of-living relief and cautious election-year politics.

With major tax reforms notably absent, the Government has opted for modest, targeted measures over structural change — a clear signal that it’s budgeting with the ballot box in mind.

While households may welcome the immediate support, those waiting for bold tax system updates will need to keep waiting — tax reform, it seems, has been politely excused from the table… for now.

Individuals

I get a tax cut… You get a tax cut… Everyone gets a tax cut!

As mentioned in Dr Chalmers’s speech to Parliament, “the additional tax cuts are modest but will make a difference.”

The change to individual tax will occur in the first marginal tax bracket after the tax-free threshold. The tax rate will be lowered from its current rate of 16% to 15% in 2026/27 and 14% in 2027/28. The changes in tax rates are as follows:

The tax saving will be $268 for the 2026/27 income year and $536 for the 2027/28 income year, both compared to the current 2024/25 tax rates.

The changes have passed Parliament and are expected to receive royal assent prior to the May 3 election.

🛑The Coalition has pledged to repeal these cuts if elected.

No changes were made to the low-income tax offset.

Additional cost-of-living measures

$150 in electricity bill credits for very household and around one million small businesses.
Ban on non-compete clauses for earners under $175,000.
20% reduction in all HELP debts owed by Australian students and former students.
HELP repayment threshold lifted from $54,435 in 2024/25 to $67,000 in 2025/26.

Superannuation

The Budget itself was quite silent on any measures relating specifically to superannuation, which was expected coming into a federal election. By not announcing any specific new measures, the current Labor Government will not have to spend their campaign defending policies which are yet to see any legislative light of day.

However, where was the $3 million tax?

Conspicuously absent from the Budget papers themselves was any mention of the Government’s current Bill intending to levy a tax on superannuation accounts greater than $3 million.

Currently, this Bill is sitting in the Parliament and not likely to be legislated with the election now only weeks away. By not removing or postponing this proposed revenue item from the Budget, the Government is taking this measure into the election, signalling its intention to re-introduce the Division 296 tax if re-elected this May.

Funding for Pay Day Super

Under ‘Pay Day Super’, all employers will be required to pay superannuation at the same time as salary and wages. Treasury released for consultation an exposure draft on the proposed Pay Day Super measures on 14 March 2025.

The ATO’s Tax Integrity Program has been allocated an additional $50 million over 3 years beginning on 1 July 2026. These additional resources are in line with the proposed measure to introduce ‘Pay Day Super’ from the same date. These reforms and supporting compliance programs reflect broader policy efforts to address the non-payment and late payment of superannuation and taxes by some employers and improving transparency for employees.

Family Trusts / Private Companies / Small Business

Coming into the election cycle, the Labor Government has decided not to put major tax reform on the table for debate. This includes no mention on previously announced reforms former leaders have flagged, such as capital gains tax, negative gearing and franking credits.

Speaking of things missing from the Budget, one main item that will affect small businesses going forward is the silence on the ongoing instant asset write off.

The instant asset write off has been a staple of small business allowable deductions since 1 July 2012 and has had many different levels throughout its time including an unlimited amount under the COVID Temporary Full Expensing regime. The law as it currently stands provides that the instant asset write off is permitted for expenditure incurred up to $20,000 on assets installed ready for use by 30 June 2025, with the threshold reverting to $1,000 at 1 July 2025.

However, there was no mention of further extending the instant asset write off this time, whether temporarily or permanently as has been lobbied by industry. Therefore, unless there is a change announced in the mid-year economic and fiscal outlook later in the year, the $20,000 instant asset write off for small businesses will end on 30 June 2025.

Continuing energy efficiency incentives

In the 2023/24 Budget, the Labor Government announced and enacted the Small Business Energy Incentive, allowing small businesses an additional 20% deduction for expenditure that supported electrification and more efficient use of energy.

Riding on those coattails, this year’s Budget announced the Energy Efficiency Grants for Small and Medium Sized Enterprises program. Grants of up to $25,000 will be available to over 2,400 businesses, funding a range of energy upgrades, such as replacing inefficient appliances and improving heating systems, with the program extended to 30 June 2026. More details on this will be announced most likely after the election.

Division 7A – ghosted again

Despite a landmark Full Federal Court decision and years of consultation, Division 7A has once again been left off the Budget agenda.

Following the Bendel decision — which concerns family trusts allocating income to corporate beneficiaries who then leave that entitlement unpaid — there had been anticipation of legislative response or clarification. This case may significantly impact how the ATO administers Division 7A and trust distributions.

Yet the Government has remained silent, choosing neither to reverse the court’s position nor codify it in legislation.

We explored the implications of the Bendel decision in detail in our previous newsletter here.

More broadly, while Division 7A reforms have appeared in Budgets dating back to 2016/17 and featured in 2018 Treasury consultation papers, this year’s Budget continues the trend of silence — with no movement on proposed changes to the treatment of loans to shareholders and associates.

General Interest Charge

Along with recently enacted legislation surrounding the instant asset write off to 30 June 2025, taxpayers who have an ATO debt will no longer be able to claim a tax deduction for the general interest charge.

This previously announced measure will deny deductions incurred after 1 July 2025.

Winemakers and beer manufacturers get relief

Producers of wine will get an additional rebate of $50,000 on Wine Equalisation Tax Producer rebate from 1 July 2026. Currently, the WET rebate sits at $350,000 pa.

To be eligible for this rebate, you must produce the wine, you are liable for WET on the sale to the wholesaler and your source product makes up at least 85% of the total volume of wine throughout the wine making process.

Brewers of beer will benefit from a 2 year pause in indexation on draught beer excise and excise equivalent customs duty. The proposed increases in August 2025, February 2026, August 2026 and February 2027 will not occur.

Multinational / Large Business / Industry

Thin capitalisation

While no further changes were announced in the Budget, the Government has flagged that additional clarification is expected around the new interest limitation rules — particularly the operation of the fixed ratio (EBITDA) test and third-party debt conditions. This will help businesses and advisers navigate the complex new regime, which took effect from 1 July 2023.

Housing and the construction industry

The Budget is using both the carrot and stick to attempt to address the housing shortage across the country. The measures announced as are follows:

Ban on Foreign Buyers

From 1 April 2025, foreign investors will be banned from purchasing existing residential dwellings for two years. The ATO will receive $5.7 million to enforce the restriction.

Help to Buy program

The shared equity Help to Buy scheme will expand, allowing eligible individuals to access lower deposits and smaller mortgages.
The Government may contribute up to 40% of a home’s purchase price. For example, a couple buying an $800,000 property with a $50,000 deposit and $510,000 loan could receive a $240,000 equity contribution from the scheme.
The Government share is repaid upon sale or when the owner is in a position to refinance.

Housing Supply & Skills Boost

The National Housing Accord continues as a cornerstone of the Government’s housing strategy. Key measures include:

$1.5 billion for the Housing Support Program to improve planning capability and infrastructure delivery.
$174 million to accelerate modern construction methods, with incentives for states and territories to reduce red tape.
Ongoing funding for the Housing Australia Future Fund and Social Housing Accelerator.

To support workforce capacity, as from 1 July 2025, a new Housing Construction Apprenticeship stream will offer:

Up to $10,000 in financial incentives for eligible apprentices.
Up to $5,000 for employers under the Priority Hiring Incentive.

These incentives are now extended to 31 December 2025.

More information is available for you here.

Managed Investment Trusts

The extension of the cleaning building management investment trust (MIT) withholding tax concession was due to commence from 1 July 2025. This has now been delayed until after any legislation receives Royal Assent.

The Government will also amend the tax laws to clarify arrangements for MITs to ensure that legitimate investors can continue to access concessional withholding rates. The changes will apply to fund payments from 13 March 2025 and will complement the ATO’s increased focus in this area to prevent misuse – see Taxpayer Alert 2025/1.

Building a Future Made in Australia

This Budget expands the Government’s industry policy with substantial co-investment into key sectors via the Green Iron Investment Fund and related initiatives. Measures include:

$1 billion for steelmakers to transition to low-emissions green iron production.
$750 million for green metals.
$250 million for low-carbon liquid fuels.

Infrastructure Boost

The Budget also confirms joint federal and state funding for the $700 million Kwinana Freeway upgrade, with the federal Government covering 50% of the project.

Australia-India Trade Accelerator

A $16 million fund will support Australian-Indian business partnerships by reducing trade barriers and enabling technical cooperation.

Residency Tax Reforms – Still No Clarity

In the 2020/21 Budget, the former Government announced proposed changes to the corporate tax residency rules, following the release by the ATO of a controversial tax ruling in 2018 that redefined their application of the central management and control tests to foreign subsidiaries, to legislate to effectively revert back to the position prior to the release of the ruling. A transitional period on the application of the tax ruling ended on 30 June 2023, however corporate taxpayers remain left in the dark as to whether any reforms will be undertaken in this area, with no further mentions in the current Budget.

Similarly, there has been no further updates from Treasury regarding previous consultations to modernise the individual tax residency framework, or relax some of the stringent rules around SMSF trustees and temporary relocations.

In this modern era of global mobility and remote technology capabilities, reforms in these areas are a high priority to provide taxpayers whether individuals or corporates alike certainty when considering movements and establishing corporate governance protocols.

Coalition Contrast: What the Opposition Said

Peter Dutton’s Budget reply delivered a sharp contrast in approach — focussing less on tax cuts and more on energy and migration levers for cost relief:

Fuel Excise Halved: A temporary 25c/L saving for motorists.
National Gas Plan: Reserve up to 20% of east coast gas for domestic use to bring prices below $10/GJ.
Migration Cuts: 25% reduction in permanent migration; 2-year ban on foreign purchases of existing dwellings.
Public Service: Reduction of ~41,000 roles, with savings redirected to fund healthcare.
Tax Cuts Repealed: Dutton confirmed the Coalition will repeal the newly legislated individual tax rate cuts.

Summary

The 2025/26 Budget delivers targeted relief and strategic investment — but leaves deeper reform and long-standing technical issues on the table. With an election now set for May 3, many measures remain promises, not law.

From a tax perspective, while households and select industries may welcome immediate support, unresolved areas such as Division 7A, tax residency, and small business incentives continue to build uncertainty.

As always, we’ll keep you informed as the legislative landscape evolves — and what it means for your structuring, planning, and compliance obligations.

If you have questions about how these announcements may impact you or your business, please get in touch with your Cooper Partners engagement team.

This newsletter is current as of 28 March 2025, however, please note that announcements and changes are being made by the Government and the ATO regularly. Before acting upon the content of this newsletter, please contact us to discuss how the above applies to your specific circumstances.