As the Labor party settle back into their seats having secured a majority in the House of Representatives, we look at the campaign promises and the unfinished business from the last term.
Individuals
- Personal income tax cuts: the 2025-26 federal budget introduced a modest income tax cut for all taxpayers from 1 July 2026 and again from 1 July 2027.
- The tax rate for the $18,201-$45,000 tax bracket will reduce from its current rate of 16%, to 15% from 1 July 2026, then to 14% from 2027-28. The saving from the tax cut represents a maximum of $268 in the 2026-27 year and $536 from the 2027-28 year.
- Legislation enabling the tax cut passed Parliament on 26 March 2025.
$1,000 instant work related expenses tax deduction
- The Government has committed to providing taxpayers who earn labour income with a $1,000 shortcut work related deduction claim on their tax return.
- Taxpayers who are likely to have claims higher than $1000 can claim in the usual way.
- The simplified tax deduction is only available to those earning labour income. Those earning business or investment income only will not be able to claim this shortcut deduction.
- Taxpayers will be able to claim other non-work related deductions in addition to the instant work related deduction.
Energy rebate extended
The 2025-26 federal budget extended energy rebates. From 1 July 2025, households and small business will be eligible for a further $150 energy rebate until the end of the 2025 calendar year. The rebates will automatically apply to electricity bills in quarterly instalments.
Cheaper home batteries
The Government has committed to reducing the cost of home batteries from 1 July 2025. Through the scheme, households will be able to purchase a typical battery with a 30% discount on installed costs – saving around $4,000 on a typical battery. The initiative extends the existing Small-scale Renewable Energy Scheme.
5% deposit scheme for first home buyers
The Government has committed to a 5% deposit scheme for all Australian first home buyers. Under the scheme the Government will underwrite eligible first home buyers, enabling them to purchase a property with a 5% deposit without the need for Lenders Mortgage Insurance.
Expanding the existing first home buyer scheme, the media release says, “there will be higher property price limits and no caps on places or income, in a major expansion of the existing scheme.”
The existing Home Guarantee Scheme is limited in places and subject to income tests. The scheme is open to Australian citizens or permanent residents who have never owned property or land in Australia, or have not owned property or land in Australia in the last 10 years, and available to owner occupiers only.
Superannuation
Legislation enabling the proposed Division 296 tax on superannuation balances above $3m lapsed when Parliament dissolved. The question now is whether the Government will seek to push this reform through the Senate with the support of The Greens.
Greens Senator Nick McKim has previously advocated for the Division 296 threshold to be lowered to $2m and indexed to inflation. In addition, the Senator tied his support for the tax to a “prohibition for super funds to borrow to finance investments.”
Originally intended to apply from 1 July 2025, if enacted, Division 296 will increase the headline tax rate to 30% for earnings on total superannuation balances (TSB) above $3m. The proposed calculation captures growth in TSB over the financial year allowing for contributions and withdrawals. This method captures both realised and unrealised gains, enabling negative earnings to be carried forward and offset against future years.
Small business
Extending the instant asset write-off for small business: An increase to the $1,000 instant asset write-off threshold has been a consistent feature of federal budgets by various governments as an incentive for small business investment.
The extension of the increased instant asset write-off threshold to $20,000 for the 2024-25 financial was passed by Parliament on 26 March 2025. The Government has committed to extending the $20,000 instant asset write-off threshold to 30 June 2026.
National small business strategy
The Government has released its National small business strategy for consultation. The strategy primarily addresses how different government jurisdictions work with small business and how to relieve some of the friction when dealing across government systems and requirements.
Energy
Green Aluminium Production Credit: The Government has $2bn set aside for a new Green Aluminium Production Credit to support Australian aluminium smelters switching to renewable electricity before 2036 (there are four of them).
If you are wondering why the aluminium industry has been singled out, the reason is two-fold; aluminium is the second most used metal in the world and according to the Institute of Energy Economics and Financial Analysis, represents about 10% of Australia’s electricity demand – Tomago Aluminium just north of Newcastle in NSW, is the largest single user of electricity in the country with electricity making up about 40% of its costs. Transition from brown to green energy is not just a consumption issue for the industry, it’s a recreation of the value chain.
Under the initiative, smelters will be able to negotiate an emissions linked credit contract payable per tonne of green aluminium produced for up to 10 years. The final credit rates will be based on individual facility circumstances and be dependent on reducing Scope 2 emissions. Scope 2 emissions are indirect greenhouse gas emissions associated with the purchase of electricity, steam, heat or cooling. They account for around 85% of emissions from aluminium smelting.
See: Aluminium to forge Australia’s manufacturing future and Department of Industry, Science and Resources. New Green Aluminium Production Credit will support the transition to green metals.
From air fryers to swimwear: tax deductions to avoid
With the 2025 tax season fast approaching the Australian Taxation Office (ATO) is reminding taxpayers to be careful when claiming work related expenses. This is in reaction to a spate of claims that didn’t quite pass the ‘pub test’. To give you a few examples of what didn’t get through…
- A mechanic attempting to claim an air fryer, microwave, two vacuum cleaners, TV, gaming console and gaming accessories as work related expenses
- A truck driver seeking to deduct swimwear purchased during transit due to hot weather
- A fashion industry manager attempting to claim over $10 000 in luxury branded clothing and accessories for work related events
These claims were deemed personal in nature and lacked a sufficient connection to income earning activities. The advice here would be – if in doubt leave it out or run it by us.
2025 priorities
The ATO is focusing on areas where frequent errors occur including:
- Work related expenses: as above, claims must have a clear connection to income earning activities and be substantiated with records including receipts or invoices. Even if an expense seems to relate to income earning activities, it can’t normally be claimed if it is a private expense. There are a wide range of common expenses that normally don’t qualify for a deduction.
- Working from home deductions: taxpayers must prove they incurred additional expenses due to working from home. The ATO offers two methods for calculating these deductions: the fixed rate method and the actual cost method (more detail below).
- Multiple income sources: all sources of income, including side hustles or gig economy work must be declared. Each source may have different deductions available.
Working from home deductions
For those working from home there are two methods to calculate deductions:
- Fixed rate method: claim 70 cents per hour for additional running expenses such as electricity, internet and phone usage even if you don’t have a dedicated home office. This method can only be used if you have recorded the actual number of hours you worked from home across the income year. A reasonable estimate isn’t enough.
- Actual cost method: claim the actual expenses incurred, with records to substantiate the claims. This method potentially enables a larger deduction to be claimed, but the record keeping obligations are more onerous.
It’s important to note that double dipping is not allowed. For instance, if you claim deductions using the fixed rate method you can’t separately claim a deduction for your mobile phone costs.
As always, if you’re unsure or need help with your tax return please reach out.
