Overview

The Federal Budget for 2025-26, the fourth handed down by Treasurer Jim Chalmers, delivered a modest deficit after back-to-back surpluses.

The Budget points to a cautious economic recovery over the next few years, with economic growth in 2025-26 improving from the previous year but still below its long-term average. Employment growth is expected to continue, albeit at a slower pace. Inflation is projected to rebound temporarily in 2025-26, before easing again in 2026-27.

Amid economic uncertainties, consumer and small business sentiment is likely to remain fragile, which necessitates government support.

Key measures

• Income tax cuts: From 1 July 2026, every taxpayer will receive an extra tax cut of up to $268. For individual taxable income between $18,201 and $45,000, the 16% tax rate will be reduced to 15% from 1 July 2026 and 14% from 1 July 2027.  
• Energy: $150 energy rebates for eligible small businesses from July 1 until the end of the calendar year ($75 per quarter). This is half what the government offered last year. 
• National Broadband Network: $3 billion to finalise the NBN rollout, aiming to improve internet connectivity across Australia. 
• Non-compete clauses: From 2027, a ban on non-compete clauses will apply to workers earning less than the high-income threshold in the Fair Work Act (currently $175,000). 
• Small business mental health and financial wellbeing: Support for small business owners through the NewAccess for Small Business Owners program and Small Business Debt Helpline.
• Disaster recovery response including Ex-Tropical Cyclone Alfred: An additional $1.2 billion over forward estimates will be made to provide financial assistance to help disaster affected individuals. 

Fiscal and economic outlook

• Economic growth: The Australian economy is forecast to grow by 1.5% in 2024-25, beating last year’s growth rate of 1.4%. GDP growth is expected to further accelerate to 2.25% in 2025-26, 2.5% in 2026-27 and 2.75% in 2027-28.   
• Inflation: CPI growth is expected to slow to 2.5% at the end of 2024-25 (from 3.8% at the end of 2023-24). Inflation is projected to rebound to 3% at the end of 2025-26 before easing to 2.5% in 2026-27.  
• Wage growth: Real wage growth is expected over the forecast horizon, with the wage price index projected to increase by 3% in 2024-25 and 3.25% in 2025-26.
• Employment: Employment growth is forecast to accelerate to 2.75% in 2024-25 (from last year’s 2.2%), but slow to 1% in 2025-26 and 1.25% in 2026-27. The unemployment rate is expected to increase from 4% at the end of 2023-24 to 4.25% at the end of 2024-25, and hold steady from there until 2028-29.
• Budget deficit and net debt: Following two years of budget surplus, the Government is expecting a deficit of $27.6 billion for 2024-25. The budget deficit is projected to widen to $42.1 billion in 2025-26. Net debt is forecast to increase from $491.5 billion (18.4% of GDP) in 2023-24 to $556 billion (19.9% of GDP) in 2024-25 and $620.3 billion (21.5% of GDP) in 2025-26.

Highlights for business

Tax

• Individual income tax cuts: For individual taxable income between $18,201 and $45,000, the 16% tax rate will be reduced to 15% from 1 July 2026 and 14% from 1 July 2027. 
• Draught beer excise: Indexation of the excise to be frozen for two years from August 2025. Biannual indexation will recommence from August 2027. 
• Alcohol excise relief: From 1 July 2026, the excise remission cap will increase from $350,000 to $400,000 per year for all eligible alcohol manufacturers, and the Wine Equalisation Tax (WET) producer rebate will also increase to $400,000.

Support for Small Business 

• 20-day payment times for construction industry workers: Federal Government will make timely payments to contractors and subcontractors working in construction on projects for Government Business Enterprises. 
• Creditor assistance for businesses affected by Whyalla Steelworks: $18 million in creditor assistance for businesses affected by the administration of Whyalla Steelworks. 
• Franchising Code of Conduct: $7.1 million over two years for the ACCC to strengthen enforcement of the Franchising Code of Conduct, ensuring more transparent and effective regulatory framework. 
• Small business mental health and financial wellbeing: Support for small business owners through the NewAccess for Small Business Owners program and Small Business Debt Helpline. 
• Support for disaster affected businesses: Small businesses will benefit from $693.2 million in co-funding with states to support small businesses and not-for-profits affected by disasters. 
• Stabilising Australia’s business registers: $207 million to stabilise Australia’s business registers, along with targeted measures to ease register connectivity.
• First Nations support: $3.4 million to establish a coaching and mentoring program for First Nations businesswomen and entrepreneurs.
• Indigenous Procurement Policy: $23.9 million to create more job opportunities for First Nations businesses. 
• Extending protections for small businesses: Extending Unfair Trading Practice and Unfair Contract Terms protections for small businesses.
• Supporting the rights of fresh produce suppliers: $2.9 million to educate fresh produce suppliers on their rights and how to enforce them.
• Energy efficiency grants: $56.7 million in grants through the Energy Efficiency Grants for Small and Medium Sized Enterprises program, delivered over two funding rounds. The program assists businesses with grants of up to $25,000 to manage their energy use and costs and improve their energy efficiency. 

Cost-of-living relief

• Energy Bill Relief: A further $150 in energy bill relief (over two quarterly instalments) for Australian households and eligible small businesses through to the end of 2025, in an extension of the energy rebate scheme that was introduced in last year’s Federal Budget. 
• Lower cost of medicines: The cost of medicines on the Pharmaceutical Benefits Scheme will be capped at $25 per script from 1 January 2026. 
• Student debt reduction: Outstanding Higher Education Loan Program (HELP) debt will be reduced by 20% (subject to the passage of legislation), resulting in a total of $16 billion in debt removed. 
• Increased HELP loan repayment threshold: The minimum repayment threshold will change from $54,435 in 2024-25 to $67,000 in 2025-26.

Skills and innovation

• 3 Day Guarantee: $4.5 million over four years from 2025–26 to Services Australia for the Child Care Subsidy 3 Day Guarantee, which replaces the Child Care Subsidy Activity Test, to ensure families are eligible for at least 3 days a week of subsidised early childhood education and care. In its first full financial year, the 3 Day Guarantee is expected to result in 100,000 families being eligible for additional hours of subsidised early childhood education and care. 
• Early childhood worker retention payment: $3.6 billion to lift the wages of early educators, benefitting up to 200,000 early childhood educators and teachers. 
• NSW public schools funding under the Better and Fairer Schools Agreement: An agreement between Federal and State Governments for an additional 5% in Commonwealth Schooling Resource Standard (SRS) funding for NSW. Building on 2024–25 MYEFO measures, this will lift the Commonwealth contribution from 20% to 25% of the SRS by 2034. This will see an estimated $4.8 billion in additional Commonwealth funding to NSW public schools over the next 10 years. 
• Permanent Free TAFE: 100,000 Free TAFE places will be available every year from 1 January 2027. 
• Increased support for apprentices: A total of $722.8 million over four years from 2025-26 to deliver increased support for apprentices, including $626.9 million to reframe the New Energy Apprenticeships Program, $77.8 million to extend the current interim Australian Apprenticeship Incentive System, $11 million to increase the Disability Australian Apprenticeship Wage Support subsidy, and $7 million to increase the Living Away From Home Allowance.
• University Study Hubs: Funding to establish additional University Study Hubs above the previously committed 20 Regional University Study Hubs and 14 Suburban University Study Hubs.

Housing

• Boost to the Help to Buy scheme: The Government will increase its equity investment in the Help to Buy program by $800 million, raising property price caps to align the average house price in each state or territory and increasing income caps from $90,000 to $100,000 for singles and from $120,000 to $160,000 for joint applications. 
• Manufacturing more homes more quickly: $49.3 million over two years to support state and territory governments in accelerating prefabricated and modular home construction. 
• Unlock more housing in NSW: The Government will provide $49.3 million over two years from 2025–26 to support states and territories to scale up existing projects for prefabricated and modular housing construction. They will also provide $4.9 million over four years from 2025–26 to continue the Regional Home Guarantee and Family Home Guarantee streams of the Home Guarantee Scheme.

Infrastructure & Transport

• Connecting and upgrading Western Sydney infrastructure: $1 billion to preserve the corridor for the South West Sydney Rail Extension, $580 million for upgrades to Townson Road, Burdekin Road and Garfield Road West to support housing growth and flood resilience, and $500 million to upgrade Fifteenth Avenue. 
• Upgrading roads in the Central Coast: $115 million to upgrade Terrigal Drive, delivering essential road infrastructure to improve safety, reduce congestion and enhance transport efficiency. 
• Urgent care clinics: The Government will provide $657.9 million over three years from 2025–26 to expand and support the Medicare Urgent Care Clinics Program. 
• Boosting connectivity across Australia: $3 billion to upgrade Australia’s remaining national fibre-to-the node (FTTN) network ensuring all Australians have access to fast, reliable and affordable internet, boosting productivity, enabling invention and creating jobs. 

Energy and Environment

• Support for green metals manufacturing industry: $3.2 billion over 19 years from 2024–25 to invest in the future of Australia’s metals industry. Funding supports aluminium smelters and green iron projects to lower emissions. 
• Additional funds for Future Made in Australia to support clean energy manufacturing: The Government has also announced priority sector funding allocations from the $1.7 billion Future Made in Australia Innovation Fund. This includes $750 million for green metals, $500 million for clean energy technology manufacturing capabilities including electrolysers, batteries and wind towers and $250 million for low carbon liquid fuels. 
• Recapitalising the Clean Energy Finance Corporation (CEFC) for energy savings and emission reductions: The Federal Government is providing an additional $2 billion to CEFC, which can lead to savings for households and small businesses making the switch to renewable energy. 
• Protecting our environment: $262 million to protect more of Australia’s natural beauty for future generations, helping the Government meet its commitment to conserve 30% of Australia's landmass and marine areas by 2030. It will preserve Australia’s iconic bushland by working with farmers to create havens for endangered plants and animals and manage critical habitat on their land. It will also help eradicate feral animals and invasive species. 

Support for Regions

• Disaster recovery response including Ex-Tropical Cyclone Alfred: An additional $1.2 billion over forward estimates will be made to provide financial assistance to help disaster affected individuals. 
• Australia’s resilience to natural hazards and preparedness to respond to disasters: $17.7 million in 2025–26 for the Bushfire Community Recovery and Resilience Program to support bushfire resilience activities in rural and regional Australia.  
• Regional and remote connectivity: Regional Express Airlines will receive up to $130 million in secured loans to maintain operations while a competitive sale is held. 
• Building Early Education Fund: $1 billion to establish the Building Early Education Fund to increase the supply of high-quality early childhood education and care places across Australia, especially in priority and under-served markets including outer suburbs and regional Australia, located on school sites where possible. 
• Banking access in regions: 800 branches commit to continue operating and no regional branch closures before 31 July 2027. 
• Sport and visitor economy boost for Illawarra: $13.6 million in 2025–26 to the NSW Government for the St George Illawarra Dragons Community and High Performance Centre, which will provide high performance and community sporting facilities for elite athlete pathways and community programs. 

Other

• Regional Australia Institute research: $2 million in 2025–26 for the Regional Australia Institute to continue research, policy and educational activities.
• APS Academy campuses: $3.4 million over two years from 2025–26 for the Australian Public Service Commission to continue to pilot APS Academy Campuses in regional Australia to provide digital and data training and employment opportunities. 

WHAT’S NEXT – MORE SUPPORT FOR BUSINESS?

On Thursday night at 7.30pm, the Opposition Leader, Peter Dutton, is set to deliver his Budget Reply. 

As the federal election approaches, we look forward to all parties engaging with the business community.

Business NSW remains committed to advocating on your behalf in the lead up to this federal election.

For more information from Business NSW, please contact:

Ben Pike, Head of Marketing and Media  |  ben.pike@businessnsw.com