Budget Update March 2025 March 25th, 2025
Fresh from the federal budget lockup, we’ve prepared a quick breakdown of what matters most — from modest tax cuts and looming interest rate pressures to the surprising silence on superannuation and seniors. While much has already been announced, a few key details (and omissions) are worth your attention.
The Bottom Line
There’s quite a bit missing from this budget, particularly for seniors and those approaching retirement. Much of the Treasurer’s budget speech rehashed programs and expenditures already announced.
Tax Cuts: A Modest Relief
Surprise tax cuts will bring a small boost to household budgets. A 1% reduction in the lowest marginal tax rate - from 16% to 15% – equates to just $5.15 per week.
These cuts are aimed at addressing bracket creep – where workers end up in a higher tax bracket due to wage increases. For example, someone now earning $140,000 who perhaps last year earned $130,000 per year, is paying an extra $68 per week in tax.
However, the cuts won’t kick in until July 2026, with a similar reduction planned for 2027 – well after the current financial stress many are experiencing.
Cost of Living: Help Still a Long Way Off
Mortgage arrears data and increased demand for financial counselling point to severe, present-day issues – yet much of the relief is delayed.
The long-awaited Help-To-Buy scheme is inching forward, with higher house price limits now allowed. The scheme allows the government to co-purchase:
• 30% of an established home
• 40% of a new build
Buyers can gradually buy out the government’s share while repaying their mortgage. Applications are expected to open later this year, pending legislative changes.
Deficit Worries and Rate Pressure
While it’s easy to tune out talk of “billions here and billions there” during the budget, the deficit is worth watching. A move into deeper deficit, in an uncertain global economy, could threaten Australia’s AAA credit rating.
A downgrade would mean higher borrowing costs across the board – though depositors might see better returns.
Superannuation: A Growing Target
Superannuation has been largely untouched in this budget.
The government remains committed to the 15% tax on super balances above $3 million, despite Senate crossbench opposition.
Notably:
- The $3 million threshold is not indexed
- The tax is based on account value, not income
- This breaks with tradition, where tax is only paid on realised gains
Example: A 30-year-old earning $147,000 annually with $300,000 in super today could hit the $3 million threshold by age 60 through compulsory contributions alone.
With superannuation on track to hit $5 trillion in the next couple of years, it’s clear the system will remain a tempting source of future tax revenue – no matter who wins the next election.
Seniors and Retirees: Left Out
One of the most glaring omissions in this budget is the lack of attention to seniors and retirees. There’s traditionally a section dedicated to this important voting bloc – not this time.
There was also no mention of extending the deeming rate freeze – one of the last remaining COVID-era concessions.
Current deeming system:
This freeze ends 1 July, notably after the election. Once lifted, thousands of income-tested Centrelink recipients will face higher deemed income, and therefore lower payments.
A return to more “normal” deeming rates will affect tens of thousands of income tested Centrelink customers and not in a good way.
Example:
$500,000 in a 5% interest account earns $25,000 in reality, but under deeming rules, only $12,500 is counted as income.
Here are the current deeming rates:
| Description | Amount |
|---|---|
| Deeming Rate 1 | 0.25% |
| Deeming Rate 2 | 2.25% |
| Singles threshold (Rate 1 applies to) | $62,600 |
| Couples combined threshold (Rate 1) | $103,800 |
Health: Bulk Billing Hopes
Health remains a major expense for many households. A $90 co-payment to see your GP is now standard.
Treasurer Jim Chalmers is aiming to bring back the days of bulk billing, with an ambitious target of 9 in 10 GP visits being bulk billed by the end of the decade.
Workers’ Rights: Non-Compete Clauses Under Fire
A positive shift: the government is taking action against non-compete clauses in employment contracts.
These clauses can prevent workers from taking similar jobs after leaving a role – even something as simple as switching shopping centres to collect trolleys. With 3 million workers are currently affected, that’s over 20% of the workforce.
In Summary: A Safe, Pre-Election Budget
This budget is neither exciting nor innovative. It treads carefully ahead of the upcoming election.
We now turn to the political theatre – watching for the C1-plated BMW to roll through the gates of Kirribilli House as the election campaign kicks off.
But keep an eye on the global stage.
If “The Don” (Donald Trump) returns and follows through on promises around tariffs and trade realignment, we could see:
- A December mini-budget, or
- A significant shake-up in next May’s budget
That’s just three years out from the next federal election.