When someone drops the word "Budget", you switch the channel. But what if that same person told you they were handing you $250? Now you're listening.
That's the thing about a federal budget. When the government decides to shake things up, it hits your tax return, your rent, your travel plans and your investment strategy.
Treasurer Jim Chalmers called this "the most important and ambitious budget in decades." Bold claim. But after reading through it? He's not wrong.
Here's who's actually winning, and who's copping it.
A new Working Australians Tax Offset (WATO) gives more than 13 million workers an extra tax cut of up to $250 a year, on top of cuts from the last two budgets. The tax-free threshold also lifts to $19,985. On top of that, 6.2 million workers get access to a $1,000 instant tax deduction, saving an average of $205 a year. Not life-changing. But it's something.
If you've been locked out of the property market, there's a hand-up coming. The government is tightening the rules around negative gearing and cutting the capital gains tax discount, which is expected to take some heat out of investor demand and help around 75,000 Australians buy their own home over the next decade.
Labor is making a play for the small business vote. The $20,000 instant asset write-off is now permanent from July, meaning if you run a small business, you can immediately deduct the cost of equipment under that threshold rather than depreciating it over years. There's also a permanent two-year loss carry-back for companies with turnover up to $1 billion.
$2 billion over four years goes toward infrastructure to support the construction of up to 65,000 new homes. Planning and zoning rules are being overhauled. Australian building standards are being made free for construction firms. It's a real push to get more homes built faster.
This is the big one. Right now, if you own a rental property and it costs you more to run than it earns in rent, you can deduct that loss from your taxable income. It's been a popular strategy for investors to reduce their tax bill while banking on the property going up in value. From July next year, that only applies to newly built homes for new investors. If you buy an existing property to rent out, you won't get the deduction.
And the 50% capital gains tax (CGT) discount, which has been in place since the Howard era is being scrapped. It'll be replaced by an inflation-adjusted system, and there's a new minimum 30% tax rate on gains to stop people timing their sales around low-income years.
Existing investors and pre-1985 assets aren't fully exempt either.
It's not just property investors copping the CGT changes. If you hold shares, crypto or any other asset for more than 12 months, you currently get a 50% discount on the tax you pay when you sell. That's going. I
It'll be replaced by the inflation-adjusted system, with a minimum 30% tax rate on gains no matter when you sell. The new rules only apply to gains made after July 1, 2027, so anything you've already made is still under the old settings. But from that date, the maths on long-term investing changes.
More than 160,000 current recipients will be removed from the NDIS under a tightening of eligibility. Australians with autism and lower support needs will be most affected, with the scheme refocusing on those with permanent and severe disabilities. The projected savings are $36 billion over four years, which is by far the biggest single saving in the entire budget.
A 30% minimum tax rate on trust distributions kicks in from 2028. This largely affects wealthy Australians using trusts to minimise tax. Farming income and inheritance are excluded, and 90% of small businesses using trusts won't be affected. For those who are affected, it's a meaningful hit.
The passenger movement charge is going up from $70 to $80. That's $10 more every time you leave the country by air or sea. Over four years, that adds up to $755 million in extra revenue for the government. It's not huge, but it's worth knowing before you book your next trip overseas.
If you're over 65 and have private health cover, subsidies are being cut. Expect your premium to rise by around $240 a year. The savings are being redirected to aged care and dementia services.
The budget is never going to please everyone. That's kind of the point. But understanding where the money is moving puts you in a better position to make decisions that actually work for you.
Whether you're a renter eyeing the property market, a small business owner, or someone with investments to think about, now's the time to have a look at how these changes flow through to your situation.
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