10 things investors need to know about Chalmers’ budget

From selling and buying property to pension entitlements, super, student loans and tax, the devil is in the detail here.

Some of the most important items the ALP takes to the May election are here in black and white.

The last federal budget before a general election was always going to be a list of giveaways. A roll call of handouts with spending cuts thin on the ground, and that’s exactly what we got from Jim Chalmers this year.

Some of the most important items the ALP takes to the May election are here in black and white. Tax cuts that focus on the lowest paid in society. Cuts to student debt and help for first home buyers who are willing to share ownership of their first home with the government (on government terms).

As a tax-cut package, these measures are a long way from filling out the program once inherited from the Coalition.

Key items – such as the headline grabbing 20 per cent discount on student HECS loans – are discussed but do not flow into the underlying budget deficit because they fall into an investment bucket in the national accounts.

In keeping with recent budgets, the best way to look at the 2025 exercise is whether the details are explicit or merely implied – with the widest lens.

Here’s what you need to know.

  

Housing – Assistance

With first home buyers looming as a key voice in the electorate, the budget upgrades Labor’s signature – if long delayed – Shared Ownership Scheme – where a homebuyer can use the government as an equity partner in buying a first home up to a maximum of $1.3m.

The budget lifts the single salary cap on this untested scheme to $100,000 from $90,000 – the expansion is more significant than it seems, allowing many more candidates to apply for the scheme which will have 40,000 places initially.

Under the plan, the government will take a stake of up to 30 per cent on an existing house and 40 per cent on a new house. When the home is sold, the government’s stake in the house must be returned at market value. The attraction of the scheme is that it offers an alternative to existing mechanisms such as the First Home Guarantee. The weakness of the scheme is that the owners must satisfy government terms on the quality and maintenance of the property which may be difficult for some owners to manage.

The government plans to take a stake of up to 30 per cent on an existing house and 40 per cent on a new house. Picture: Max Mason-Hubers

Housing – Foreign buyers ban

The budget also confirms that existing properties will no longer be eligible for purchase by foreign buyers (with some exceptions).

As the measure suggests, the government will begin banning foreign buyers from purchasing existing homes for two years from 1 April 2025 to take pressure off the housing market.

This is a rapid execution of a policy which may well garner substantial support and attention, however, research into the property industry has shown that the volume of foreign purchases are not a swing factor in the outlook for the residential property market.

 

Pensions 

For almost one million older Australians, no news in the budget papers concerning the deeming rate means good news. The deeming rate determines access to the pension through ‘deeming’ how much an older Australian has made on their retirement investments.

The benchmark deeming rate is to be left unchanged at 2.25 per cent which is nothing short of a thinly disguised giveaway to older Australians because even the most conservative investment – such as term deposit rates – are available at nearly twice the level of the official deeming rate.

This budget decision means the deeming rate has not been changed since the Morrison government in 2020.

It also means it will be increasingly difficult for any future government to put a realistic figure on the rate which was originally meant to reflect official levels, but instead has failed to match the substantial increases over the last three years (with only one 0.25 per cent interest rate cut earlier this year.)

Student loans

The government has been under pressure over the level of off-budget measures it has been rolling out in recent months – the HECS student loan discount plan is a strong example. In what is an unapologetic vote grabbing exercise, the Albanese regime will offer a 20 per cent flat discount on all HECS student loans if it is re-elected. The item is not highlighted in the budget measures – because it is technically an investment.

However, the scale of this policy change is of interest to any budget watcher – the cuts add up to around $19 billion in student debt across every level including HECS/HELP, VET Student Loans, the Australian Apprenticeship Support Loan and other income contingent student support accounts.

This is a potentially powerful move aimed squarely at students where their loan obligations blew out under the Morrison government changes – the average HELP debt is now a hefty $27,600 and many students in arts and related studies have higher debts than average – the cut would reduce $5,520 from the average student loan.

 

Tax 

The Coalition government of Morrison and Frydenberg set personal tax cuts in train with an ambitious agenda designed to offer proportionate reductions across all tax bands.

Last year, the Albanese government went ahead with these cuts but adjusted the program so that upper earners had a smaller than expected cut while middle and lower earners did better than expected.

In this year’s budget, the government sharpened that tactic by introducing a two-phase tax cut which is strictly limited to a low tax band. Even the government concedes Labor’s new tax cuts are modest, but they will make a difference. Combined with Labor’s first round of tax cuts, the average tax cut is expected to be around $43 per week or more than $2,200 in 2026-27, and around $50 per week or more than $2,500 in 2027-28.

 

Tax cut – How it works

At present, the lowest band (not including the Medicare levy) is 16 per cent and that relates to those earning between $18,200 to $45,000.

Under this year’s plan, that 16 per cent rate drops to 15 per cent on July 1, 2026 and to 14 per cent in 2027. The government has phrased this move as a tax cut for everyone which is true in theory because if you earn, say $200,000 a year then your second-lowest tax band is set to dip lower – however in practice this tax cut is aimed squarely at the traditional Labor Party base.

The widening gap between the lower bands – The first (or lowest) band is zero to $18,200, then 16 per cent on $18,200 to $45,000 will slide to 14 per cent in the coming years – may cause ‘disincentive’ issues down the line.

The enlarged jump – 14 per cent up to the next highest band of 30 per cent – will spark a debate in some quarters that it is not worth getting a pay rise into the higher band. Since the new cuts do not commence until July 1, 2026, there will be plenty of time for this debate to take off.

The government has announced tax cuts, but it won’t make a huge difference to the bottom line.

Super $3m tax

Where are we on the plan for a new super tax at 15 per cent on earnings on amounts over $3m based on unrealised gains? Well, the notorious measure is nowhere to be seen in the Treasurer’s speech that’s for sure, neither is it appearing in the budget papers and for that matter it is very much stuck in parliament even though it appeared with substantial revenue forecasts attached in the past.

In reality, this measure may never make it through parliament – if it does, it will be substantially redesigned.

 

Super inflation indexing kicks in for retirees

The most important issue for active super investors is what the budget ‘implies’ – the government has left all key super caps and thresholds in place. Importantly, the budget also allows for caps and thresholds which are indexed to inflation to kick in later this year – some caps such as Division 293 are not indexed, so this penalty tax on high income earners will not have an increase in its threshold of $250,000 a year.

However, the amount you can have tax-free in super as a retiree will move up from $1.9m to $2m on July 1 this year.

In contrast, the amount you can contribute pre-tax (concessional) will not change remaining at a dollar cap of $30,000 each year.

Medical Support

Changing circumstances within the medical professions has reduced bulk billing GP services – an issue which particularly affects older Australians.

The budget confirms the government’s signature move to boost public health. Its key element is that the government is investing $7.9 billion ‘so all Australians can see a GP for free’.

As the Treasurer explains: “For the first time, Labor will expand bulk billing incentives to all Australians and create an additional new incentive payment for practices that bulk bill every patient.”

By 2030, this will mean 18 million additional bulk billed GP visits each year, with 9 in 10 GP visits are free and bulk billed.

Jim Chalmers’ budget confirms the government’s signature move to boost public health.

Energy bills

The one item almost guaranteed in every budget these days is an energy relief measure – the government has extended the $150 energy rebate, which is effectively a universal giveaway. ‘From 1 July 2025, every household and around one million small businesses will see another $150 in rebates automatically applied to their electricity bills in quarterly instalments, on top of the previous rebates already being rolled out to Australian households and small businesses.’

Originally published as 10 things investors need to know about Chalmers’ budget