All Australian taxpayers will receive an extra tax cut of up to $268 next year — as well as the year after — if Labor is re-elected in May, in a move that the Coalition says it will not match if it wins government.
Handing down the 2025-26 budget on Tuesday, Treasurer Jim Chalmers announced there would be a $42 billion budget deficit next financial year.
Citing global trade disruptions, the economic cost of major weather events in Queensland, and the wars in Ukraine and the Middle East, he said "storm clouds" were gathering in the global economy.
"Australia is neither uniquely impacted nor immune from these pressures," he said.
"This budget is our plan for a new generation of prosperity in a new world of uncertainty."
Tax cuts for most workers
From 1 July 2026, the 16 per cent tax rate for earnings between $18,201 and $45,000 will be cut to 15 per cent. A year later, that rate will drop again to 14 per cent.
For workers who earn above $45,000, this will mean a further tax cut of $268 in 2026-27 and $536 from 2027-28.
"Whether you're a truckie, a teacher or a tradie, whether you're in manufacturing, mining or the care economy, you will earn more and keep more of what you earn," Chalmers said in a joint statement with Prime Minister Anthony Albanese.
Tax cuts for all workers have been announced in the 2025 federal budget. Source: SBS News
"This will take the first tax rate down to its lowest level in more than half a century,” he said.
The additional tax cuts are projected to cost $17.1 billion over forward estimates.
The Coalition said it would not support the tax cuts, calling the measure a "cruel hoax".
"Seventy cents a day, in a year's time, is not going to help address the financial stress Australian families are currently under," the Opposition's treasury spokesperson Angus Taylor said.
"It will do nothing to restore your household budget now, at a time when the typical Australian household with a mortgage is $50,000 worse off."
Greens leader Adam Bandt said the "tiny tax tweak budget" was a "missed opportunity to deliver real cost of living relief".
More money for health, disability, and aged care
Tuesday's budget included pre-announced measures such as the $150 energy bill relief, a $793 million women's health package, $8.5 billion to lift bulk billing rates, and cheaper medicines.
Cost of living measures also included an increase to the Medicare levy low‑income threshold to ensure some singles, families, and seniors and pensioners will be exempt from paying the levy.
For singles the new threshold will go from $26,000 to $27,222, for families it will go from $43,846 to $45,907.
There's also $423.8 million to support Australians with disability, and more funding for aged care reform.
No more non-complete clauses
Non-compete clauses, which can stop Australians from switching to better, higher-paying jobs, will also be abolished for most workers.
The government said more than three million workers, including those in childcare, construction, and hairdressing are covered by such clauses.
"People shouldn't need to hire a lawyer to take the next step in their career," Chalmers said. "Or permission from their old boss if they want to be their own boss, and turn an idea into a small business.”
The government will also change laws to amend 'no-poach' agreements that block staff from being hired by competitors.
More money for social cohesion
The Albanese government is set to spend, including support for Australia's Jewish and other multicultural communities.
Last year the government announced a range of funding for those impacted by the Hamas-Israel war, including improving security for Jewish communities and grants for Arab and Muslim bodies, as well as for media companies to combat misinformation.
Unveiled in Tuesday's budget is new funding for security at Jewish and Muslim places of worship, as well as multicultural programs including $15 million for a new sports hub and $10 million for independent multicultural media outlets, and $2 million for the Holocaust Institute of Western Australia.
African and Chinese communities will also receive some funding to restore museums and other programs.
