The 2025-26 Federal Budget announced few new tax measures but has reiterated a number of announcements made in the lead-up to Budget. Our tax experts have compiled a summary of the key changes and what they mean for you.
Personal income tax cuts
The Government announced that it will reduce the personal tax rate for the $18,201 – $45,000 income tax bracket to help fight bracket creep. The current tax rate of 16% for this tax bracket will be reduced to 15% from 1 July 2026 and to 14% from 1 July 2027. For individuals with taxable income above $45,000 this will mean annual tax savings of $268 for the 30 June 2027 income year and $536 thereafter.
Additional funding for ATO compliance activities
The Government will extend its funding for ATO compliance activities with respect to multinationals and other large groups by committing an additional $717.8m for the Tax Avoidance Taskforce, extending the program until 2028-29. The Government will also commit significant extra funding towards the Shadow Economy Compliance Program and Personal Income Tax Compliance Program, as well as to extend the Tax Integrity Program to ensure timely payment of tax and superannuation liabilities by medium and large businesses and wealthy groups.
Restricting foreign ownership of housing
The Government has announced a ban on foreign persons (including temporary residents and foreign‑owned companies) purchasing established dwellings for two years from 1 April 2025. The ban will be subject to limited exceptions for investments which significantly increase housing supply or support the availability of housing on a commercial scale, and purchases by foreign‑owned companies to provide housing for workers in certain circumstances. The Government has also provided additional funding to the ATO and Treasury to target land banking by ensuring that foreign investors comply with requirements to put vacant land to use for residential and commercial developments within reasonable timeframes.
Clarifying the treatment of certain managed investment trusts
The Government announced that it will amend legislation to make it clear that a trust ultimately owned by a single widely–held investor (e.g. a foreign pension fund) can still qualify as a managed investment trust (MIT) and access concessional withholding rates on fund payments to its investors. This is consistent with current industry practice and will apply to fund payments from 13 March 2025.
Deferred start date for clean energy MITs
The Government also announced that it will defer the start date for changes to the clean building MIT regime which extend the withholding rate of 10% to data centres and warehouses and introduce minimum energy efficiency requirements for existing and new clean buildings. These measures were originally announced in the 2023-24 Budget to start from 1 July 2025, but will now commence after the amending legislation receives Royal Assent.
Deferred start date for foreign resident CGT measures
The Government has announced it will defer the start date for the 2024-25 Budget measure, Strengthening the foreign resident capital gains tax regime, from 1 July 2025 to the later of 1 October 2025, or the first quarter after the amending legislation receives Royal Assent. The measure includes amendments to:
- clarify and expand the types of assets that give rise to taxable capital gains by foreign residents,
- broaden the principal asset test from a point-in-time test to one that can be satisfied at any time in the 365 days prior to the CGT event. This test makes disposals of shares or units by foreign residents taxable only if the market values of underlying company or unit trust’s assets are predominantly taxable Australian real property, and
- require foreign residents disposing of shares and other membership interests exceeding $20m in value to notify the ATO, in the approved form, prior to the transaction being executed.
While a Treasury Consultation Paper was released last year covering these measures, no draft legislation has been introduced.
Relief for excise on alcohol
The Government has announced measures to provide support for the hospitality sector and alcohol producers by:
- pausing indexation on draught beer excise and excise equivalent customs duty rates for two years from August 2025, recommencing August 2027. This measure is limited to draught beer only with indexation continuing to apply to excise for beer and spirit products sold in bottles and cans, and
- increasing the support available under the existing excise remission scheme for manufacturers of alcoholic beverages and the Wine Equalisation Tax producer rebate for eligible wine producers. This measure will increase the caps for all eligible brewers, distillers and wine producers from $350,000 to $400,000 per financial year, from 1 July 2026.
