Australian Federal Budget 2025-2026: What businesses need to know

The Government’s big moment in the 2025-26 Federal Budget was the personal income tax cuts. Income tax cuts are a dazzling headline but in reality they only deliver a tax saving of up to $268 in the 2026-27 year, with a tax saving of up to $536 from the 2027-28 year.

At the same time, the Australian Taxation Office has been allocated almost $1bn in funding to extend and enhance its compliance programs.

Key Business Highlights from the budget at a Glance

Energy

$180bn to deliver a $150 energy bill rebate extension until the end of 2025.

The government has also announced a new round of Energy Efficiency Grants for small and medium-sized enterprises (SMEs) to help lower energy bills and reduce emissions.

Eligible businesses can access funding to invest in energy-efficient appliances, equipment upgrades, and building improvements that cut operating costs and improve sustainability.

The initiative aims to support SMEs in managing long-term energy costs while contributing to broader national emissions reduction targets.

Healthcare

$8.5bn on Medicare for increases to Medicare payments, 50 new urgent care clinics, and a bulk billed GP service.

$1.8bn over 5 years for cheaper medicines on the Pharmaceutical Benefits Scheme.

$240m for women’s health – reproductive health and menopause

Education

$500m to provide a 20% cut to HECS-HELP debt for students, and a realignment of the repayment schedule to reduce the amount required to be paid (from 1 July 2025).

Housing

$800m to expand the ‘Help to Buy’ scheme reducing the size of the deposit required to buy a home by co-buying with the Government.

Families

Three days of subsidised childcare for families with young children (income tested) from 1 January 2026 replacing the Child Care Subsidy activity test.

Lifestyle & Hospitality businesses

From August, the excise on beer will be frozen for 2 years.

Here’s what else small and medium businesses need to know about the budget.

Energy rebates for 1 million small businesses

Households and small business will receive an additional automatic credit of $150 on their energy bills in quarterly instalments between 1 July 2025 and 31 December 2025.

The extension of energy bill rebates will cost $1.8 billion over two years.

Instant asset write off to be axed

Although the Budget proposes to extend the $20,000 instant asset write-off for small businesses for the 2024–25 financial year, this measure has not yet been legislated. If it doesn’t pass before Parliament dissolves for the federal election, it will automatically lapse, effectively ending the program. If this is the case, the threshold will be $1,000.

The instant asset write-off has long been a valuable tool for small businesses looking to invest in equipment and vehicles, manage cash flow, and benefit from immediate deductions. If the measure is not revived or replaced, businesses will lose access to this upfront tax benefit, and may need to revert to slower depreciation rules.

Businesses should keep this uncertainty in mind when planning capital purchases for the coming year and seek advice on the timing of asset acquisitions.

Non-compete clauses to be abolished

The Government has announced that it will ban non-compete clauses for low and middle-income employees (under the Fair Work Act high income threshold is currently $175,000). Non‑compete clauses are conditions in employment contracts that prevent or restrict an employee from moving to a competitor.

Back in April 2024, Treasury released an issues paper for consultation on Worker non-compete clauses and other restraints. The review stated that, “The direct consequence of a non-compete clause is that it hinders competition among businesses: it disincentivises workers from leaving their current job, creating a barrier to the entry of new businesses and the expansion of existing businesses.”

The Government is also make changes to competition law to prevent businesses from:

• Fixing wages by making anti‑competitive arrangements that cap workers’ pay and conditions, without the knowledge and agreement of affected workers.
• Using ‘no‑poach’ agreements to block staff from being hired by competitors.

Income tax cuts: Consumers get more cash to spend

From 1 July 2025, eligible students and graduates will receive a 20% cut to their existing HECS-HELP debt. This is a one-time reduction aimed at easing the cost of higher education and addressing concerns about rapid debt growth due to past indexation.

The Budget also realigns the repayment schedule, meaning borrowers will start repaying their loans at a slower rate. This makes repayments more manageable and allows people to retain more of their income as their earnings increase.

This reform is expected to free up disposable income, especially among younger Australians who often hold the bulk of HELP debt. With more take-home pay, these individuals may increase their spending on goods, services, and lifestyle needs—potentially boosting demand in sectors like retail, entertainment, travel, and hospitality.

Predictions that global economy growth will slow

Australia’s economy is expected to grow, albeit slowly, at 2.25% in 2025-26 and 2.5% in 2026-27.

The direct impact of Ex-Tropical Cyclone Alfred on economic activity is estimated to be up to 0.25% of GDP.

Support for Australian made products

While not heavily publicised, the Budget includes a number of initiatives that indirectly support Australian manufacturing and locally made goods:

Freeze on Beer Excise

This benefits local brewers and hospitality venues, helping them remain competitive and keep prices stable.

Excise Rebate Increase

From 1 July 2026, the excise remission cap will increase to $400,000 for eligible alcohol producers, giving more headroom to local brewers, distillers, and winemakers to invest and grow.

Government Procurement Savings via Local Capacity

While $700m in cuts to consultants and contractors may reduce external spending, it also signals a shift towards in-house delivery, which may open the door to Australian businesses offering scalable, cost-effective solutions.

Boosts to regulators

In addition to new ATO funding, regulators like the ACCC and ASIC are sharpening their focus on phoenix activity and corporate misconduct. This increased scrutiny means businesses will need to ensure their structures, reporting, and governance are watertight. Many will require specialist advice to navigate the rising compliance burden and avoid unintended risk exposure.

Pause to beer excise

Indexation on the draught beer excise and excise equivalent customs duty rates will be paused for two years from August 2025. This just means that the price of beer won’t go up because of tax.

Support is also provided under the Excise remission scheme for manufacturers of alcoholic beverages increasing caps for all eligible brewers, distillers and wine producers to $400,000 per financial year, from 1 July 2026 (up from $350,000).

This measure provides cost relief to hospitality venues, pubs, clubs, and small brewers, many of whom are still recovering from rising input costs and economic pressures. By helping businesses avoid price hikes, it supports more stable margins and encourages consumer foot traffic.

Combined with rising consumer spending power (due to measures like student loan debt relief), this could provide a much-needed boost to local hospitality and events-driven sectors.

The government will expand eligibility for the WET Producer Rebate, allowing more small and medium wine producers to access up to $350,000 annually in rebates.

This change is expected to benefit regional and boutique wineries, helping them maintain competitiveness, invest in their operations, and support local jobs.