Table of Contents
Introduction
The recent Australian Federal Budget was announced on March 25th 2025, The Australian Federal Budget is the annual financial statement presented by the government that outlines its planned revenue (income) and expenditure (spending) for the upcoming financial year (which runs from 1 July to 30 June). It sets out economic policies, funding for public services, tax changes, and allocations for various government programs. As a small business owner, the federal budget can impact your business and its operations through changes in taxation, grants, subsidies and economic policies. This article will cover everything you need to know about the recent federal budget announcement and how it impacts your business.
Taxation Measures: How It Affects Your Small Business
Personal Income Tax Cuts
Personal income tax cuts benefit sole traders. Stage 3 personal income tax cuts will take effect, expecting to benefit about 1.5 million sole traders by reducing their tax burden. These across-the-board tax cuts mean many small business owners will pay less income tax on their business profits moving forward. Nothing relating to instant asset write-offs have been announced.
The tax cuts will be delivered by lowering the marginal tax rate for taxable income between $18,201 to $45,000. Currently at 16% for the 2024-25 and 2025-26 income years, this rate will reduce to 15% for the 2026-27 income year, and to 14% for the 2027-28 and future income years.
| Taxable income ($) | Marginal tax rate (%) for2024-25 and 2025-26 | Marginal tax rate (%) for2026-27 | Marginal tax rate (%) for2027-28 |
| 0 – 18,200 | Nil | Nil | Nil |
| 18,201 – 45,000 | 16 | 15 | 14 |
| 45,001 – 135,000 | 30 | 30 | 30 |
| 135,001 – 190,000 | 37 | 37 | 37 |
| Above 190,000 | 45 | 45 | 45 |
Income tax rates for Australian tax residents, excluding Medicare levies.
Medicare Levy Low-income Thresholds
Consistent with prior years, the Government will increase the Medicare levy low-income thresholds for singles, families and seniors and pensioners from 1 July 2024 as follows:
- the threshold for singles will increase from $26,000 to $27,222
- the family threshold will increase from $43,846 to $45,907
- for single seniors and pensioners, the threshold will increase from $41,089 to $43,020
- the family threshold for seniors and pensioners will increase from $57,198 to $59,886, and
- the family income thresholds will increase by $4,216 for each dependent child or student, up from $4,027.
Instant Taxation Write-Offs: Non-Renewal of the $20,000 Instant Asset Write-Off
The Government has not extended the temporary $20,000 instant asset write-off beyond 30 June 2025. This means that from 1 July 2025, small businesses will no longer be able to immediately deduct the full cost of eligible assets costing less than $20,000.
Instead, assets over $1,000 will need to be depreciated over time under general small business depreciation rules.This change could impact cash flow and investment decisions, particularly for businesses that regularly purchase equipment or tools under the previous write-off threshold.
Alcohol Tax Relief Impacting Hospitality Businesses and Breweries
The Government is pausing indexation of draught beer excise and related customs duties for two years (from August 2025 to August 2027), preventing scheduled tax increases on beer.
It is also raising the excise remission cap for small brewers and distillers, and the Wine Equalisation Tax rebate cap for winemakers, from $350,000 to $400,000 per year starting 1 July 2026. These measures reduce tax costs for breweries, distilleries, wineries, and venues, supporting those small businesses’ cash flow.
Payday Superannuation Initiative Announced
Although not a specific feature in this year’s Federal Budget, businesses will be pleased to have the opportunity to have seen the first draft of the proposed law released by the Treasury on 14 March 2025 to give effect to the Government’s Payday super initiative that was announced in the 2023-24 Budget.
Not only does the draft law (which is open for comment until 11 April 2025) set out the new framework for requiring superannuation contributions to be received by an employee’s superannuation fund within seven calendar days from the time that the applicable salary/wages is paid, it also makes some important changes to how the SG charge (SGC) applies.
Although there is a penalty regime for late or non-payment of a SGC liability, under the new framework, late contributions and the SGC will be tax deductible. However, there will be no tax deduction allowed for any applicable general interest charge or late payment penalty related to the SGC.
The proposed start date for Payday super remains at 1 July 2026. Although this is a little over 15 months away, it is recommended that employers should start to understand the varied requirements under Payday super and how it could be implemented. Read more in our Alert dated 21 March 2025.
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ATO Enforcement & Compliance Initiatives
Crackdown on the Cash Economy
The ATO’s Shadow Economy Compliance Program is being extended and expanded with an additional $155.5 million over four years. This boosts the ATO’s ability to target shadow economy activities—such as businesses under-reporting income or paying workers off the books—so that dishonest operators do not gain an unfair advantage over compliant small businesses.
Tackling Illegal Phoenix Activity
The Government is investing in enforcement to combat phoenixing (companies liquidating to avoid debts and then restarting). ASIC is provided $3.0 million to improve data analytics and take action against phoenix operators (with a focus on high-risk sectors like construction). This complements the ATO’s ongoing Phoenix Taskforce efforts to deter directors from using phoenix companies to shirk liabilities.
Employee Related Measures
Ban on Non-Compete Clauses for Lower-Paid Employees
The Government will ban non-compete clauses in employment contracts for workers earning less than $175,000 annually, effective from 2027. This change aims to enhance worker mobility, allowing employees to pursue better opportunities or start their own businesses without restrictive clauses. Industries such as childcare, construction, and hairdressing are expected to be significantly impacted. The ban is projected to boost wages and productivity, potentially adding approximately $5 billion to the economy annually.
Reforming Occupational Licensing
The Government will work with states and territories, unions, and employers to develop a national occupational licence for electrical trades. This initiative aims to allow electricians to move where they are needed most, addressing skill shortages and improving labor mobility.
Miscellaneous Support Initiatives for Small Businesses
Energy Bill Relief Extension
Small businesses will continue to receive support with power bills. The Budget includes a six-month extension of the energy bill relief program until 31 December 2025, providing up to $150 in additional bill credits for around one million eligible small businesses. This relief will be applied as direct rebates on electricity bills, helping to ease cost pressures on shops, farms, and other small enterprises.
Grants for Energy Efficiency Upgrades
To help reduce operating costs, the Government is providing grants for efficiency upgrades. The Energy Efficiency Grants for SMEs program offers a total of $56.7 million in funding, with individual grants of up to $25,000 available for eligible small and medium businesses to upgrade equipment and improve energy efficiency (e.g., replacing outdated appliances or enhancing heating and cooling systems). This support helps businesses lower their energy usage and bills.
Support for Innovation and Start-ups
The Budget highlights the already announced $400 million for the new Industry Growth Program, which offers advice and matched funding grants to start-ups and small businesses developing innovative projects. This program is designed to help small firms commercialise ideas and expand, especially during early growth phases that are often challenging. Eligible businesses can access expert mentoring and co-funding to accelerate their growth.
Social Enterprise Loan Scheme
The Government is partnering with the not-for-profit sector to improve small business financing for social enterprises. $1.2 million is allocated to establish a Social Enterprise Loan Fund (with White Box Enterprises) that will offer small loans to social enterprises (including those that employ disadvantaged Australians). This initiative will enable mission-driven small businesses to access affordable credit to start or grow their operations.
Fast Payment Times on Government Projects
To improve cash flow for small contractors, the Government is mandating faster payment terms on public projects. Major Government Business Enterprises (like NBN Co and Western Sydney Airport Corporation) will now aim to pay their contractors and subcontractors within 20 days for completed construction work. Quick payment is intended to help small suppliers in construction and related trades get paid promptly, reducing the strain of waiting months for invoices to be settled.
Targeted Assistance for Troubled Businesses
The Budget sets aside emergency support for small businesses facing extraordinary challenges. For example, $18.0 million is being provided to assist small businesses left out-of-pocket by the Whyalla Steelworks administration (insolvency), helping affected suppliers with creditor assistance payments. This one-off measure recognizes the impact on local small firms when a major company collapses and provides funds to alleviate financial hardship in the community.
Strengthening Fair Competition Protections
New measures aim to level the playing field for small businesses dealing with big business counterparts. The Government plans to extend unfair trading practice laws to cover small businesses, addressing power imbalances in negotiations. It is also consulting on expanding protections from unfair contract terms and unfair practices to franchisees and other small firms under industry codes. In addition, regulators are being resourced to enforce fair conduct: $7.1 million over two years goes towards these efforts.
