What do Labor's tax policies mean for you?
Now that the federal Labor Government has been re-elected, it is timely to review their tax-related policies. There were many potential tax changes outlined on the campaign trail as well as in the 2025-26 Federal Budget handed down in March. From modest income tax cuts and a new $1,000 instant deduction for work-related expenses, to changes impacting business asset write-offs, superannuation payments, and student debt relief—these reforms could affect families, individuals, and businesses alike. Here we’ve summarised the key announcements to help you understand what to expect.
Personal income tax cuts
Modest tax cuts for individuals were announced in the Federal Budget 2025-26 and subsequently legislated. From 1 July 2026, the 16% tax rate applicable to taxable income between AU$18,201 and $45,000 will be reduced to 15%. From 1 July 2027, the tax rate will be reduced further to 14%.
Instant work-related expenses tax deduction
The ALP has also announced that, as from 2026-27, taxpayers who earn labour income will be able to choose to claim an AU$1,000 instant tax deduction instead of claiming individual work-related expenses. There will be no requirement for receipts for claims under AU$1,000.
Taxpayers claiming more than AU$1,000 in work-related deductions would still be able to do so in the usual way. Charitable donations and other non-work-related deductions would continue to be claimed on top of the instant tax deduction. The precise details of the instant deduction and the consequential amendments are yet to be seen.
Instant asset write-off for businesses
The returning Labor Government has committed to a 12-month extension on the instant asset write-off, to June 30, 2026. In its current form, the instant asset write-off allows eligible businesses to claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used, up to AU$20,000.
Payday super
As from 1 July 2026, employers will be required to pay their employees’ super at the same time as their salary and wages. Exposure draft legislation was released in March 2025, and it is expected that the government will need to introduce and pass this legislation in the next few months for business, digital service providers, superannuation funds, and clearing houses to have enough time to prepare for the massive changes this initiative will involve.
The Labor Government remains committed to this initiative.
HECS-HELP debt relief
A one-off debt reduction measure will reduce student debt by 20% for all Australians who currently have a student debt. The 20% reduction will be calculated based on the person’s debt amount at 1 June 2025.
The government will also increase the threshold at which individuals are required to start making repayments. Currently, individuals are required to make repayments for the 2024-25 financial year when they earn $54,435 or more. The government has announced the threshold will increase to $67,000 in the 2025-26 financial year.
For example, an individual currently earning $80,000 annually with a current student debt of $35,000 will have their debt reduced to $28,000 before indexation with the 20% reduction. Under the Government’s proposed changes to the repayment system, this will reduce the compulsory repayment for the 2025-26 financial year to $1,950, saving the individual $850. See the Australian Education Department’s calculator here.
Taxation of superannuation balances over AU$3 million
While the Division 296 measure failed to pass during the final Parliament sitting before the 2025 Federal Election, the returning Labor Government has signalled intentions to push on with the controversial Bill. In its current form, this measure would see a 15% tax incurred on superannuation balances over $3 million, including taxation of unrealised gains. Learn more in our blog: New Super Tax from the Labor Government
Ban on foreign investors purchasing established dwellings
On 16 February 2025, the government announced that it would ban foreign investors (including temporary residents and foreign owned companies) from purchasing established dwellings from 1 April 2025 through 31 March 2027. A review will be undertaken to determine if the ban should be extended beyond 31 March 2027.
Need help understanding how these changes affect you?
Contact one of our advisers today for personalised guidance to navigate the new Labor Government tax policies and plan with confidence.
