This newsletter breaks down the key announcements from the Federal Budget 2025-26, including tax cuts, energy bill relief, healthcare investment, housing support, and business reforms—what they mean and how they impact Australians.

2025-26 Budget: Initiatives and Measures

The 2025-26 Budget introduces various initiatives aimed at boosting economic growth, providing relief to households and businesses, and strengthening government programs. These measures also reflect an ongoing effort to balance fiscal responsibility with voter support.

Personal Income Tax Cuts
On 1 July 2026, the government will introduce a two-stage reduction in tax rates for taxpayers in the $18,201-$45,000 income bracket. The tax rate will decrease from 16% to 15% in 2026-27 and then to 14% by 2027-28. These tax cuts are designed to ease the financial burden on lower-income earners, providing savings of up to $268 in 2026-27 and $536 from 2027-28 onwards. These cuts will result in a $648 million cost to the government over the next four years.

Medicare Levy Thresholds will increase starting 1 July 2024, which means that more low-income earners will be exempt from paying the Medicare levy. The changes will particularly benefit singles, families, and seniors, who will pay less in tax due to the higher exemption thresholds. These adjustments will cost the government $648 million over five years, helping to reduce the healthcare cost burden on low-income households.

Energy bill relief
the government has allocated $1.8 billion to provide a $150 rebate to households and small businesses on their energy bills. This rebate will be distributed in quarterly instalments from 1 July 2025 to 31 December 2025, aimed at easing the pressure from rising energy costs.

Healthcare
An $8.5 billion investment will enhance Medicare, including increases in Medicare payments, the establishment of 50 new urgent care clinics, and expanded access to bulk-billed GP services. Additionally, $1.8 billion will be allocated over five years to make medicines more affordable through the Pharmaceutical Benefits Scheme (PBS). $240 million will also be directed to support women’s health, particularly for reproductive health and menopause services.

Housing initiatives
The government will inject $800 million into expanding the ‘Help to Buy’ program, which assists homebuyers with lower deposit requirements through government equity contributions. The eligibility thresholds for this program will also increase, with singles now able to earn up to $100,000 and joint applicants up to $160,000. The government will also impose a two-year ban on foreign ownership of established homes starting 1 April 2025, aimed at curbing land banking practices. This measure will help increase home availability for Australian residents.

Business and employment
The government has announced the ban of non-compete clauses for low and middle-income employees starting in 2027. This move aims to boost workforce mobility and competition by removing contractual barriers that prevent employees from joining competing businesses. Additionally, the beer tax will be frozen for two years from August 2025, helping to stabilize beer prices for consumers, while excise benefits for wine and alcohol producers will be expanded starting 1 July 2026.

The government has also extended trade tariffs on Russia and Belarus, imposing a 35% tariff on goods from these countries as a gesture of support for Ukraine. While these tariffs have a symbolic purpose, they will not have a significant impact on revenue generation.

Tax compliance
$999 million has been allocated to the Australian Taxation Office (ATO) to enhance its tax compliance programs. These programs will target tax avoidance, the shadow economy, and improve personal income tax compliance. The government expects a threefold return of $3.2 billion through these initiatives. Additionally, the Tax Practitioners Board (TPB) will receive $27.4 million over four years to enforce new standards and address high-risk tax practitioners involved in fraud or aggressive tax schemes.

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Strategies for a Secure Retirement in Australia

Retirement is a milestone that many Australians look forward to—a time to relax, pursue passions, and enjoy the fruits of decades of hard work. Yet, for Generation X (those born between 1965 and 1980), the path to a secure retirement is less certain than it was for their parents. Concept of ‘lodgment day’ is important for Division 7A purposes.

Retirement Readiness and Challenges
Generation X faces challenges such as higher debt, delayed home ownership, and supporting both children and aging parents. Many in this generation have insufficient superannuation savings, with 40% of Australians aged 45–54 holding less than $100,000 in superannuation. Unlike previous generations with defined benefit pensions, Gen X must rely on superannuation, which is subject to market fluctuations.

Building a Strong Foundation
Start saving early to take advantage of compounding. Even small contributions can grow significantly over time. Superannuation is essential, but diversifying across shares, property, and savings accounts provides additional security.

Managing Risks in Retirement
Retirees face risks like longevity, market downturns, and inflation. A diversified portfolio can help reduce these risks. As retirement nears, shifting toward conservative investments like bonds or cash helps protect capital.

Maximising Investment Returns
Avoid high-risk investment decisions to “catch up” on savings. Reinvesting dividends and interest through compounding can significantly boost long-term returns. A balanced portfolio with a mix of growth and defensive assets offers stability and growth.

Strategies for Mitigating Risk
Annuities provide guaranteed income but limit flexibility. Shifting to conservative assets as retirement approaches helps protect savings from volatility.

Maximising Superannuation
Maximise contributions through salary sacrificing and paying off high-interest debt. Regular reviews ensure your retirement strategy stays on track.

Remobilising your Business after a Forced Shutdown

Unexpected disasters – whether natural events like floods or bushfires, or economic crises – can force businesses into sudden shutdowns. Restarting after such disruptions can feel overwhelming, but with a structured approach, you can get back on track efficiently. Here are the key steps to remobilising your business and making the process smoother.

Assess the damage and prioritise recovery.

Before reopening, thoroughly assess your business’s financial and physical condition. Identify immediate needs, such as repairing premises, replacing inventory, or securing alternative workspaces if necessary. Engage with your insurer early to fast-track claims and determine what support you’re eligible for.

Review your finances and seek assistance.

Cash flow can be tight after a shutdown. Review available financial reserves and explore relief options such as government grants, disaster assistance loans, or temporary tax concessions. Speak to your accountant about restructuring debts or deferring payments where possible.

Reconnect with your team

Your employees play a vital role in the recovery process. Communicate openly about timelines, changes to roles, or new operational procedures. If necessary, offer flexible work arrangements while business activity ramps up.

Re-engage customers and suppliers

Notify your customers of your reopening through social media, email updates, and local advertising. Reconnect with suppliers to secure stock and negotiate payment terms if needed. Consider offering special promotions or loyalty incentives to encourage repeat business.

Strengthen business continuity planning

Use this experience as a learning opportunity. Develop or update your business continuity plan to prepare for future disruptions. This could include:

• Diversifying income streams to reduce dependency on a single revenue source.
• Investing in cloud-based systems for remote operations
• Establishing an emergency fund

Stay positive and adapt

Recovery takes time, but a proactive and flexible approach can accelerate your business’s return to stability. Seek professional advice when needed, and don’t hesitate.

How to Apply for the Home Equity Access Scheme (HEAS)

If you’ve been researching reverse mortgages or home equity loans, you might have come across the Home Equity Access Scheme (HEAS) offered by the Australian Government and managed through Centrelink. You may also know it by its previous name, the Pension Loans Scheme (PLS).

Although Services Australia provides detailed information about HEAS online, it can be challenging to find someone who can clearly explain the finer details and answer specific questions.

Centrelink recommends seeking independent legal and financial advice before applying. However, not all advisers are familiar with the complexities of HEAS, and some may have ties to alternative equity release options. Make sure any advice you receive is truly independent.

A common frustration is that the HEAS application requires you to declare that you’ve understood the terms and conditions before you’ve had a chance to speak to someone with specialist knowledge.

For this guide, we’ll assume you already know the basics of the scheme and are considering submitting an application.

How to Get the Information You Need

Specialist HEAS officers at Centrelink are the best people to answer your questions.

Helpful tip:
Submitting an application doesn’t lock you into anything. However, it gives you access to a dedicated HEAS Specialist who will contact you for a phone interview. During this call, they will explain the scheme’s terms in detail and ask if you wish to proceed.

Use this opportunity to ask every question you have. Prepare a list beforehand and don’t hesitate to request more time to think about your decision if needed.

Important:
If you are appointing a professional nominee to handle the process, ensure they have specific experience with HEAS. General Centrelink experience alone may not be enough.

The HEAS Application Process

While Centrelink prefers online applications, you also have the option to complete a paper form if you prefer. Forms are available on the Services Australia website:

• SA310 – for partnered couples
• SA496 – for singles

Be prepared for long processing times — sometimes up to six months. HEAS applications are not fast-tracked like Age Pension or income support claims. However, payments can be backdated to the date you lodged your claim if you request it.

To avoid delays, make sure you provide:

• Council rates notice showing the property’s valuation (not just the instalment notice).
• Building insurance policy showing current coverage (not contents insurance). If you own an apartment, request a copy of the building insurance from your body corporate.

• Title information:

  • If your property has a mortgage or caveat, provide supporting documents or evidence that it has been cleared.

  • If a mortgage remains, submit the loan agreement and confirm your lender allows participation in HEAS (some do not).

• Accurate and complete forms:

  • Make sure all required parts are signed, including both Part A and Part B where necessary.

Good to know:
If you are not already a Centrelink customer and have not completed identity verification before, you must visit a Centrelink office in person. Once verified, your identity confirmation is valid for all future Centrelink dealings.

Be Patient and Persistent

Because HEAS is a niche service within Centrelink, only a small number of staff specialise in it. Although all staff receive general training, many will have little or no direct experience handling HEAS applications.

To navigate the process smoothly:

• Apply early and prepare your questions in advance.
• Expect delays and allow plenty of time for processing.
• Follow up if processing seems excessively delayed; lodging a formal complaint is an option if needed.
• Double-check all your paperwork to avoid unnecessary setbacks.

Patience and attention to detail are key to successfully accessing the HEAS.

Managing Superannuation After the Death of a Partner

Many retired couples intend to leave most of their assets to their surviving spouse, which sounds simple in theory. However, when it comes to superannuation, things can quickly become complicated.

If you and your partner are both retired and drawing a pension from your super accounts, it’s important to understand the potential impacts of inheriting a partner’s superannuation. Taking the time now to plan for different scenarios can ease the financial burden during an already difficult period.

What Are Your Options?

Receiving a Pension or a Lump Sum

The first step is understanding whether you would receive your partner’s super balance as a reversionary pension or a lump sum.

Most SMSFs and many retail super funds allow members to nominate a reversionary beneficiary. This arrangement lets the surviving spouse continue receiving pension payments without the funds leaving the tax-free super environment.

Continuing the pension generally provides significant tax advantages. If the benefit is paid out as a lump sum instead, you might not be eligible to contribute it back into super due to age or contribution limits. Investing the lump sum outside of super could expose you to tax on any income or capital gains earned.

It’s worth noting that even if you start by receiving the benefit as a pension, you still have the flexibility to withdraw part or all of it as a lump sum if needed.

Understanding the Transfer Balance Cap (TBC)

The next issue to consider is the transfer balance cap (TBC) — the maximum amount you can transfer into a retirement-phase pension account.

Since its introduction on 1 July 2017, the TBC has gradually increased from $1.6 million to $1.9 million, and is set to rise to $2 million on 1 July 2025. Importantly, investment earnings on amounts inside your pension account are not capped.

A challenge can arise if receiving your partner’s pension would push your transfer balance account over your personal cap. Keep in mind that your personal cap may differ from the general cap depending on how much of your cap you have already used. You can check your individual limit via ATO online services through myGov.

Fortunately, when you inherit a reversionary pension, there is a 12-month grace period before the inherited amount is counted towards your transfer balance. This allows time to organise your finances without breaching the cap immediately. However, this grace period applies only to reversionary pensions, not when starting a new death benefit pension from an accumulation account.

Example Scenario

Let’s consider Angela’s situation:

• Angela started an account-based pension in 2020 with $1 million.
• Her partner, Greg, passes away on 10 March 2025, leaving her a reversionary pension valued at $900,000.
• Angela’s personal transfer balance cap is $1,714,000 and is expected to increase to $1,768,000 by 1 July 2025.
• When Greg’s pension balance is added to Angela’s account on 10 March 2026, her transfer balance will be $1.9 million — $132,000 over her expected personal cap.

Thanks to the 12-month window, Angela has time to adjust her affairs before the excess triggers additional tax.

Strategies to Manage the Transfer Balance Cap

If your partner’s death benefit would cause you to exceed your cap, there are a few strategies you can consider:

Option 1: Roll Back Some of Your Pension

You can move part (or all) of your own pension balance back into an accumulation account to free up cap space for the inherited pension.

• Investment earnings in accumulation are taxed at up to 15%.

• This approach allows you to keep as much of your super as possible inside the favourable tax environment.

• Your current pension must be commutable — meaning you can partially or fully withdraw or roll it back. Most account-based pensions are commutable, but defined benefit or lifetime pensions may not be.

In Angela’s case, if her pension is commutable, she could roll back $132,000 into accumulation and then accept the full $900,000 from Greg’s pension within her cap.

Option 2: Withdraw the Excess as a Lump Sum

If your pension is non-commutable, you might need to retain only part of the death benefit as a pension and withdraw the excess over your cap as a lump sum.

• Super death benefits that can’t be retained in pension form must be withdrawn.

• Angela, for example, could withdraw $132,000 from Greg’s pension within the 12-month window, allowing the rest to stay in pension phase without breaching her cap.

If assets must be sold (such as in an SMSF), early planning is important.

Option 3: Take the Entire Death Benefit as a Lump Sum

Another option is to withdraw the entire death benefit out of super.

• This is sometimes the only option if your transfer balance cap has already been fully used.

• Be cautious: once funds leave super, future investment earnings are taxable, and you may not be able to recontribute the money later depending on your age and contribution limits.

Defined benefit pensions follow different rules if they are non-commutable, so specialised advice will be necessary if that applies.

Prepare Early to Protect Your Future

Losing a partner is emotionally devastating, and having to make complex financial decisions at the same time can be overwhelming. Planning ahead can minimise unnecessary tax liabilities and protect your retirement income.

If your partner passes away, contact your super fund or SMSF administrator promptly to review your options. It’s also a good idea to seek independent financial advice to navigate the rules around reversionary pensions and the transfer balance cap.

Ideally, both partners should review their estate planning strategies while they are still healthy, and continue updating them as circumstances change.

The Age Pension When Living Apart

Under Australia’s means-testing rules, couples are generally assessed together for the Age Pension.
Each person is paid a partnered rate, and their combined income and assets are counted — no matter who owns what.

The logic is that couples pool resources and share living costs.
But what happens when you can no longer live together because of illness?

How Illness Separation Works

When one partner moves to receive care — whether at a family member’s home or into aged care — Centrelink may classify you as an “illness-separated couple.”

Usually, Centrelink updates your Age Pension status automatically when one partner enters care.
However, mistakes do happen. You must tell Centrelink if you are no longer living together due to illness and expect to be paid the illness-separated rate.

There’s no formal application form.
You simply need to make Centrelink aware of the situation.

If you are separating for reasons other than illness, such as divorce or permanent separation, different Age Pension rules apply.

What Changes for Illness-Separated Couples

If you are classified as illness-separated, you are still treated as a couple for the purposes of the assets and income tests — but each person is paid the higher single Age Pension rate instead of the lower partnered rate.

Because the single rate is higher, the income and assets test thresholds that apply to you are also increased.

Here’s how it works for the period 1 July 2024 to 30 June 2025:

For homeowners:

• A single homeowner can have up to $314,000 in assets before their pension starts to reduce, and the cut-off limit is $697,000.
• A couple living together can have up to $470,000 in assets before reductions apply, with a cut-off at $1,047,500.
• For an illness-separated couple, the assets free area is still $470,000 combined, but the cut-off rises to $1,236,000 combined.

For non-homeowners:

• A single non-homeowner can have up to $566,000 in assets before reductions, with a cut-off at $949,000.
• A couple living together can have up to $722,000 before reductions, and a cut-off at $1,299,500.
• For an illness-separated couple, the combined assets free area remains $722,000, but the cut-off increases to $1,488,000.

The income test is also more generous:

• A single person can earn up to $212 per fortnight without their pension reducing, and their income cut-off is $2,510 per fortnight.
• A couple living together can earn up to $372 combined per fortnight without reduction, with a cut-off at $3,836.40.
• An illness-separated couple has the same income free area of $372 combined, but a higher income cut-off of $4,968 per fortnight.

These higher limits recognise the extra costs you face when living separately.

Example: Mike and Carol

Mike and Carol live in their own home.
Mike has superannuation of $500,000, Carol has $100,000, they have a joint bank account with $50,000, and a car and household contents valued at $30,000.
Their combined assets total $680,000.

When living together, the maximum Age Pension rate for each of them was $866.10 per fortnight.
However, because their assets exceed the free threshold by $210,000, their pensions are reduced.
At a reduction rate of $1.50 per $1,000 over the limit, this results in a $315.00 fortnightly reduction each.
They each received $551.00 per fortnight.

When Carol moves into aged care, Centrelink assesses them as illness-separated.
Now, they are each entitled to the higher single Age Pension rate of $1,149.00 per fortnight.

Even after the same reduction of $315.00 each, their Age Pension increases to $834.00 per fortnight each — a significant improvement compared to when they were classified as a couple.

Conditions for Illness Separation

To qualify as an illness-separated couple, the following conditions must be met:

• You must be unable to live together in your home.
• The inability to live together must be due to illness or infirmity affecting one or both partners.
• The separation must result in higher living expenses compared to living together.
• The separation must be expected to continue indefinitely.

Important

Entering temporary respite care does not qualify, because the separation is not permanent.

If both partners move into aged care, even if they live in the same facility or share a room, they are still considered illness-separated for Age Pension purposes.

Final Note

This update focuses on couples separated due to illness, which is the most common situation.
Other scenarios — like one partner living overseas or being imprisoned — involve different Age Pension rules.

If your living arrangements change due to illness, it’s essential to contact Centrelink immediately to make sure you receive the correct Age Pension rate.