Federal Budget 2025-26 webinar

How will the Federal Budget impact you?
The Federal Budget 2025-26 is set to be handed down by Treasurer Jim Chalmers on 25 March, shaping economic policy and priorities in a pivotal election year. What will the key announcements mean for businesses, investors, and individuals?

Join us for an in-depth webinar featuring our leading economist, tax experts, and finance advisers. They will break down the key measures, assess their implications, and explore the broader economic and policy landscape as we approach the federal election.

Discussion highlights:

✅ Economic outlook and policy direction in an election year
✅ Tax and finance measures impacting businesses and individuals
✅ Key opportunities and risks to prepare for

Thanks for listening! Visit the RSM Australia website to ask the hosts a question.

Chapters

• 0:00 Introduction and context of the 2025-26 Australian Federal Budget
• 3:06 Economic implications of tax cuts and subsidies
• 25:53 Overview of tax measures
• 30:06 Budget highlights and impacts for individuals and families
• 39:40 Will the migration handbrake slow growth and increase wages over time?
• 42:20 Will the LNP announce tax reforms and raise GST to %15 in their budget reply?
• 44:27 Has the government missed a change to address productivity challenges?
• 48:21 Help for tax practitioners?
• 48:53 Why are the tax practitioners losers in this budget?
• 49:25 What are the major changes for sole traders?
• 50:03 What's the general feel of the capital investment initiatives?
• 51:48 How will lower commodity prices impact the Australian dollar?

Transcript

0:00

Thank you for joining us for today's webinar on the 2025-26 Australian Federal Budget. I'm your host, Andrew Sykes, and I'm delighted to have your company today. Before we begin, I would like to take a moment to recognise the traditional owners of all the different lands we are meeting on today. As I myself host this webinar from the country of the Ngunnawal people, I pay my respects to the elders past and present and celebrate the diversity of Aboriginal and Torres Strait Islander people and their cultures and connections to the land and waters of Australia. I'd also like to thank all of our clients who voted for us in the Client Choice Awards announced today. And in particular, I'm proud that RSM has won our category in the best accounting firm and consulting firm for seven years straight. So thank you to all our clients who participated and voted for us in those awards. So if you ever doubted we were in election mode, the government has revealed the best kept tax cuts secrets in years. Last evening, Treasurer Jim Chalmers unveiled the pre-election budget packed with tax cuts, subsidies and major spending measures, all designed to ease cost-of-living pressures for households. and reduce operational costs for businesses. From tax relief to energy bill subsidies, student debt reductions, healthcare investments, this budget is focused on delivering short-term relief. But the bigger question remains, is this approach sustainable for the long run? To help us unpack this and what it means for individuals and businesses, and Australia's broader economy, we have our expert panel with us today. So a warm welcome to our panel. Joining us today is Rob Zammit who will break down key announcements that will directly impact on individuals and families. He'll let us know what's changing and what it means for your financial future. We're also joined by RSM economist Devika Shivadekar who will take a step back from this and examine whether this budget truly addresses Australia's long-term economic challenges or if it's simply a temporary fix. And we have our tax specialist, Liam Telford, who will help us navigate the tax implications of these measures and what they mean for both businesses and individuals. So there's a lot to cover today, but we will allow time for questions. So we're going to have a Q &A at the end of the webinar. So please post any questions in the Q &A section. We also have our free report available to download from the RSM website. I'll have one of my team post a link to this in the chat now. Please feel free to download this report for more detailed information. So welcome to all the panel, but Devika, let's start with you. This budget delivers tax cuts, subsidies and spending measures aimed at immediate cost-of-living relief. Do think these measures are going to provide a meaningful boost to the economy? And do you want to give us your overview of where it sits? Yes, thanks so much, Andrew. Thank you, everyone, for joining us today. It was a long night yesterday, and we've been able to unpack a fair bit of the budget. But let's try to look at the key highlights and see what that means for the Australian economy going ahead. So the economic forecasts paint a very mixed picture, and understandably, the Treasury is concerned about what's happening globally, particularly with Trump at the helm again in the United States. Australia has already been slapped with tariffs of 25 % on both aluminum and steel. And there are chances that our pharma industry as well as our beef exports might also be targeted next. There's a chance we might be one of those friends who are going to get some short-term relief, but there's no guarantee, which means naturally whether it's the government - that is, the treasury - or it's the central bank, which is the RBA... both will be cautiously optimistic about the outlook for the economy. And that is pretty evident in the forecast that the treasury has outlined in yesterday's budget papers. Understandably, household consumption is expected to pick up in the medium term, thanks to the surprise tax cuts that were outlined. Not material, not very big in amount, but still good enough to at least give that boost to your psyche when it comes to, "Oh, we are getting additional money, our tax obligations have been reduced a certain bit." It's probably more a play on how they present the budget and how they present themselves to the general public than materially changing anything. However, $17bn in tax cuts is still a significant amount when we look at the broader picture of the government's purses and its fiscal position. Business investment outlook - mining investment is expected to recover, particularly in 2024-25 and also towards June 2026. However, non-mining investment broadly remains flat. We'd like to believe mining investment is probably going to be supported by a good good performance by commodity prices, even though there is a lot of uncertainty attached to that as well. Typically, the treasury has been fairly conservative in its commodity forecasts. It usually expects prices of commodities to be fairly moderate. However, it has historically, have always outperformed commodity prices have always outperformed those forecasts, which means mining sector still sees some signs of recovery. And we can expect mining investment to recover - at least, the treasury expects mining sector to recover in the short-to-medium term. Non-mining investment understandably remains flat considering how poorly the private sector has been performing. Bulk of the economy has been run by the public sector in Australia over the last couple of years. So understandably the outlook for the non-mining sector and investments in that area is fairly subdued. Economic growth projections are 1.5%, going up to 2.25%, which is unchanged from the December-May forecast that were published. So growth remains fairly, there's nothing exciting going on over there. Inflation, however, has been moved a fair bit higher, so from 2.75% to 3% for the next fiscal year. And it is expected to, However, It is expected to return to the target band six months earlier than initially projected. So in the short-term, the Treasury expects inflation to pick up slightly. This is probably because the energy bill relief that was outlined in last year's budget ends in the ends by the second quarter of 2025. So when that happens, naturally, the subsidies that were artificially bringing prices down, will pick up in the short-to-medium term. However, it is expected to settle down as time progresses. Labour market is key over here. It is important to see that the peak of the unemployment rate has been revised lower to 4.25%, which means the treasury, in line with what the RBC is, expects the labour market to remain fairly tight. And naturally, we still have a lot of spare capacity in the economy. All the increase in population that has been happening has been so far absorbed fairly well, which means the general understanding or where we expect full employment to sit at that is pretty much lower than what was previously expected, which means labour market is tight, which means a lot of people still have scope to earn an income. And that also indirectly means when there's more jobs, there's more income and there's more income, there's more propensity to consume. So When the RBA says it is concerned about demand-driven pressures, this is what it means. And the treasury also seems to be thinking a fair bit in a similar way when it comes to the labour market tightness. Wage price index is expected to grow 3% over the last fiscal year and increase to 3.25%. But it is going to be fairly moderate compared to what we saw just outside of the pandemic where wages were growing at 6%, 7 and 7%. Naturally, this is a more pre-pandemic level of wage growth, something that has been a long running average in Australia, which should be good news for businesses because ultimately labour costs broadly are going to be more measured when wage price index growth also is what would we say tempered at 3.25% Net overseas migration is expected to fall down. This is not news. This is something we were already aware of. The government has been chasing the policies to reduce migration in order to reduce demand for housing and overall bring inflationary pressures down. What this means for the education sector and other retail and hospitality industries which employ all these migrants is a different story. But for now, I think the government is set on its plan of reducing migration going into 2027. It's going to be gradual. It's not substantial. It's not something that is going to be quite significant. However, visa rules have been tightened and more and more focus is being are directed towards those job profiles which have a shortage in Australia. So what it would mean is they are aiming to bring down inflation driven by demand by higher migration and at the same time solve the problems in the labour market which come from skill shortages. So if those policies are rolled out in a responsible manner, I think it might just help us solve our labour market tightness and bring inflation down to a certain extent. Can you please have the next slide? So this is very interesting, I think this chart, it's very important to see how the budget balance and net interest payments are going to pan out in the forecast period. The government expects the budget balance to be less impressive than it was previously. A lot of it has largely in the previous years been run by high commodity prices and a strong labour market, which essentially means commodity prices were higher, so our revenue was greater. And the labour market was tighter, which means more and more people were paying higher income tax. Can you please have the next slide? So essentially the position, the fiscal outlook is fairly, it's not probably as mixed as the economic forecasts are, but it's in no way a very good position that the government sees it's. its purses being in. So underlying cash deficit projections are expected to be 1.5% of GDP going down to 21% from 1% this year to 1.5% next year and improve a tiny bit to 1.2% in 2026-27. But they do not expect to return to a surplus position for the next 10 years at least, which is quite sizable. Understandably, as the population of Australia grows and the subsidies that the government has outlined for most of us are rolled out, naturally the deficit position is likely to be sustained for the next decade at least. Net debt positions are expected to keep increasing. However, it's important to note that we are still in a very good position compared to our OECD counterparts. So the... The trick here or rather a long term view would be to not disturb it too much. The advantage that we have here of being in a very, very comfortable position when we look at our debt metrics, it's important that we do not splurge that and we do not go into a position where then we are highly debt ridden. So 19.9% to 23.1% by 2029 is still a good number, is still a good debt position to be in. However, what is concerning is how are we going to service our debt obligations if we are going to continue spending on the various subsidies that have been outlined. Commodity price outlook and economic pressures, I think I did touch upon this, that it has been largely driven by commodity prices and a strong labour market. However, going forward, the treasury expects prices for commodities to trend fairly downwards. Iron ore has been reduced to $60 per ton, metallurgical coal to $140, thermal coal to $70, and LNG to $10, which is quite a significant downgrade to commodity prices, a lot more conservative than what we saw in last year's budget. Understandably, with the uncertainty surrounding Trump's policies and the weakness in China, which is our largest commodities consumer, there is no surprise that the that the treasury is fairly worried about what that means for commodity prices and indirectly for the revenue that is generated from our terms of trade and the external sector, which directly feeds into our GDP number. Global economic pressures continue to contribute to a very subdued outlook broadly. Can we please have the next slide? Now, this is an interesting chart that I would like to draw your attention to, which will bring me to my next part where I discuss why is it that the government chose to give so much of subsidies to households and individual tax cuts and the sort. As you can see here, the green line shows household savings ratio as a percentage of disposable income. Historically, Australia has averaged at the 5% mark when it comes to household savings ratio. Barring the peak that we see in the green line in 2020 to 2022, which was during the COVID period, we saw that household savings ratio almost touched 25%. 5% of what has historically been our average savings ratio. That was driven mostly by people working from home, being in extended lockdowns and not able to go out and spend that money. However, that also meant that once the lockdowns were lifted, people went out and there was unabated spending, which brought us to the problem of inflation. Since then, and since the RBA has started increasing its interest rates, there has been a material rise in mortgage repayments for households. As you can see in the household debt service ratios, which is interest payments as a percentage of disposable income, which is the blue line, it is touching on the right-hand side almost 182%. However, the household debt ratio, which is the other line, is now touching almost the 100% mark, which means people are essentially paying through their noses to pay for their mortgage repayments. In such a situation, even the smallest tax cut, even the smallest subsidies goes a long way. We have seen historically that all the subsidies outlined in the federal budget delivered last May and all the savings that have been accumulating in households have been directed towards the offset accounts rather than being spent, which is why we have been seeing inflation come down slowly yet steadily. And mortgage repayments and offset accounts sitting in banks have been a considerable amount. So people are being smart with the way they are managing their finances. However, that does not take away the fact that they have been extremely under pressure and any amount of subsidy that the budget delivers is helpful. Can you please have the next slide? So support for households, I think I'll leave it to Liam and Robert to do a deep dive into the tax cuts. Electricity rebates are again, a blanket subsidies that have been outlined. Honestly, this is something I had said the last time as well. For people, for most of the people or other people like who have been lucky in their professional lives being in a fairly comfortable position when it comes to income. We do not need these electricity or energy rebates subsidies that have been outlined because that's spare cash. We are able to manage our finances better. Rather than being more targeted towards people who actually need them, when a blanket relief is given to each and every Australian, that is where these demand-driven inflationary pressures take form. That is when these discussions start taking shape, that "What are we going to do with the money that is sitting in our accounts?" $150 on a quarterly basis is not significant, but add that to the existing rebates, it is fairly significant. If you are able to save at least $50 per month on what you are essentially paying for your electricity needs,$50 a month is still a fair bit. I would say at least it buys you a fortnight worth of groceries in some areas. So that is still a significant amount that is sitting idle in our cash. And for people like you and I, we are not necessarily strained by the rising interest rates or inflation and we are in a comfortable position, all of this is spare idle cash that is just sitting to be spent. So it's a short-term relief and it's not a structural fix. In my opinion, it's a bandaid solution. Healthcare bulk-billing incentives and Medicare funding is something that I would applaud the treasurer for marking out. This is something that is extremely critical. We did see that a lot of GPs were moving from bulk billing to their private practices. However, when the government gives more incentives to those GPs, it makes these services more accessible to an ordinary Australian. And it also reduces the burden on the public infrastructure, which is public hospitals where people simply run to the emergency departments because it's free of cost, and sit there for hours. And the public healthcare system is under considerable pressure to address those needs simply because people are not, for whatever reasons, reaching out to their GPs, not able to afford these services, and at the same time delay their... their access to the medical fraternity, which broadly is not beneficial in the long term. So having lower prescription costs, having bulk-billing incentives for GPs, in my opinion, is a good measure that has been outlined. When it comes to education and housing, student debt cuts and help to buy expansion, help to buy scheme which has been expanded. In my opinion, again, this is a short-term fix, not long term because long term we need to fix the chronic under supply in housing. We do not need to give subsidies to individuals who enter the housing market even more. We have to fix the supply side of things. And when we look towards student debt cuts and helping to buy expansion, What we are essentially doing is we are giving them more avenues to enter the market without fixing the supply side. So demand outpaces supply, which risks higher house prices in the short-to-medium term. So while it's attractive, I would say this is more of an election pitch and does not really fix the long-term problem of chronic undersupply of housing. Support for businesses, think energy relief, $150 rebates for 1 million small businesses, similar to individual households. The numbers are for you guys to see green investment. Of course, that is going to give a boost to the industries that are engaged in that space. I think one of the greatest points that we need to discuss here is a non-compete ban on workers who are earning less than 175K. Now this is a double-edged sword in my opinion. What the non-compete clauses do is they definitely help businesses safeguard their interests when it comes to not losing out on their trade secrets, not losing out on their clients. It prevents employees from taking all the knowledge to competitors, which broadly ensures stability and justifies investment in their up-skilling. However, on the flip side, it can also deter talent It creates a lot of enforcement challenges and it definitely reduces the morale of the workers because that is what impacts productivity in the long term. Now, how does this work if you are engaged, let's say, in an organisation which does not have good work-life balance, which does not... which doesn't essentially help you upskill, but you are stuck with them because of the non-compete clauses. You do find a job that you prefer and you want to switch, but there's the clause of not being able to join them for three months, for six months, or whatever may be the clause. It essentially just defeats the morale of that employee. So it's a double-edged sword. It's good as well as bad, both for the businesses as well as employers. So what is key is needing a balance. In my opinion, I think a good way to navigate this would be balance this protection with flexibility. Perhaps using tailored agreements like confidentiality clauses or non-solicitation terms to safeguard the assets and the IP without overly restricting employee mobility is what is key when we look at the non-compete ban. And broadly, I think in the long-term, this should help productivity, simply because it makes firms more competitive in the sense that they will be pushing their employees harder to go the extra mile in order to generate those revenues in order to be able to offer those greater wages if they see there's a risk of their employees leaving and going elsewhere. So productivity. Long-term productivity enhancing short-to-medium term, definitely more risky than beneficial for businesses. Can you please have the next slide? We have discussed all the subsidies that have been outlined, but the big question is how is the government going to pay for all this if it's also providing tax benefits? Now, the only way for government to recover all this money that it is injecting into the economy is by way of higher taxes or by way of taxing corporations higher. There's no other way to do that. Because if you are relying entirely on your external sector, that is open to external risks, that is open to geopolitical tensions, impacting prices, impacting your revenues. But internally, the only way the government can actually earn all the money that it is spending is by taxing the future generations higher. So while in the short-term, It might be very lucrative. It might be something that people are extremely happy about, all the tax benefits, all the energy bill relief that we are getting. 20 years down the line, it's probably going to be our kids who are going to be paying for those taxes, which is why I feel the subsidies are not really beneficial in the long term. They are bandaid solutions. They have to be balanced with sound tax reform in such a way that you are able to not squeeze individuals, not squeeze corporations, but at the same time deliver a mandate in such a way that individuals stand to benefit in the long term and all the burden does not go on to our future generations. With this, think I would like to go back to you, Andrew, and leave the deep dive into the tax advantages and disadvantages to the subject matter experts. Thank you. Thank you very much, Devika. And just a reminder to post any questions in the Q &A and to download our free report from the link in the chat there at rsm.com.au. Now it's time to hear from our tax expert, Liam. What are the key announcements that will impact individuals in business land? Or mainly business for you. think, Yeah, thanks, Andrew. I think Robert's going to cover the personal income tax cuts as well as the Medicare levy threshold changes, which doesn't leave me with too much to talk about, unfortunately. Over the last few years, every budget basically, we sort of talk about the disappointment where we're not seeing that wholesale holistic reform to increase efficiency, productivity, and resilience in the economy. And perhaps not surprisingly, that has been repeated this year. Again, not particularly surprisingly, given that we're on the eve of election, we haven't seen any novel tax collection or integrity measures, apart from a very specific measure to amend the Managed Investment Trust withholding regime in response to a taxpayer alert that was issued by the commissioner a couple of weeks ago. We did see the deferral of a couple of previously announced measures. So there was one associated with the Clean Building Management Investment Trust withholding tax concession, originally slated for 1 July 2025. That's been deferred until after the amending legislation received for Royal Assent and similarly with measures to strengthen the foreign resident CGT regime, again slated to apply from 1 July 2025, but has now been deferred to the later of 1 October 2025 or effectively after a relevant date after the date of Royal Assent. We have seen significant funding for the ATO and the tax practitioner board. So around $1bn of additional funding for the ATO, most of which around $710m will go to the tax avoidance task force, the extension and expansion thereof. So they currently focus on the top 100 and top 1000 public and multinational businesses, as well as the top 500 privately owned groups. In terms of what is meant by expansion, that's currently unclear, but we could see some other sort of taxpayer segments come within their crosshairs. And I think quite critically, this investment is forecast to generate more than $3bn in additional tax collections over the forward estimates period. So you've got a decent multiplier there. And that's been brought to bear in previous years. Additionally, something that's quite topical, the tax practitioner board will be afforded strengthened sanctions. So in dealing with sort high risk tax practitioners, we've given an additional $27.4m to modernise the registration framework for tax practitioners and undertake additional compliance targeting, compliance activity targeting those high risk tax practitioners. This is expected to generate an additional $47m in tax collections over the forward estimates period. And I think more critically should assist in instilling further confidence in the tax profession. I think disappointingly, unlike last year's federal budget, we didn't see an extension of the $20,000 Instant Asset Write-Off that was available until 30 June 2024 for small businesses with aggregated turnover of less than $10m. That's not to say that it won't, eventually, but it will become, I expect, a point of contention in the upcoming federal election. But apart from that, disappointingly, but not surprisingly, not too much, know, no real wholesale reform that we were, everyone's been hoping for, just some incremental tinkering. But the winners obviously ATO and tax practitioner board, the losers being tax practitioners who, rightly or wrongly, will be subject to enhanced scrutiny. And large taxpayer groups who will again be subject to further scrutiny with a better resourced Australian Taxation Office. Thanks to that Liam. You did leave out the beer drinkers there mate, but maybe Rob is going to answer that for us. So importantly, beer drinkers saving $10m over the next year, I believe, which is absolutely terrific. Rob, we'll go over to you now and just a reminder, put any questions in there in the Q &A, if you have any that come up from Liam's presentation there. So, Rob. over to you to highlight some of the individual impacts. Yeah, it was a pretty slow and simple budget for many and many media outlets. You could see there the pandas were claiming the big win. Winners of this year's budget were the Adelaide Zoo giant pandas.$3.8 million has been allocated to them over the next five years. That works out to $14,000 a week, which is being spent on pandas. So you could tell it obviously it was a slow and simple budget. That $14,000 a week is much more than your $10 a week tax cuts that individuals are going to be getting. So I wish I was a panda in this budget. But all jokes aside, there were some benefits for families and students. Firstly, that energy relief bill has been continued. So people will be getting $150 off their... energy power bills, which applies per household. You know, I remember when this first came out, I had some clients with, you know, the holiday home and their primary residence and they're saying, does that mean I get two? And I think this goes to Devika's point of this is not focused and not to, you know, all the people that need it. And this will come in at $75 rebates. So quarterly against your power bills. So I guess everyone's a winner there. Less power bills to pay for, and maybe we do get to spend that money somewhere else in the economy. Big winner is university students with HELP debts. Now this isn't finalised yet, has to go through passing of legislation. But the proposal is that HELP debts are reduced by 20% on the total value from 1st of July. So a bit of water to go under the bridge with this one still. This is in addition to, you recall, in previous years that they've made reforms around the indexation or the increasing of these HELP debts each year, effectively the interest that's been charged on them. So, you know, pays to be a uni student that hasn't paid off their HELP debts over the years. So a lot of people got to think if they're going to be repaying this debt, maybe now they're thinking about paying it off. Maybe you want to delay it just because the government's going to be knocking off 20% of the bill if this gets passed. They've also increased the income that you can earn before you have to start paying off your HELP debt. So it's going to be changing from about $54,000 a year to $76,000 a year. Meaning that, you know, once you start earning over $67,000 a year, then you start slowly reducing down your HELP debt there. So big winner university students. And also first home buyers. They've changed the help to buy scheme, the income limits again. So single individuals can earn up to $100,000 a year, or a couple can now earn up to$160,000 a year. Now these have increased from $90,000 and $120,000 for couples. And what this scheme allows people to do is effectively buy a home and the government buys a portion of it. The government will... contribute up to 30% of the cost of the home for an existing home or 40% for a new home. So it's quite good if you think about the government owning 40% of your home and you're not having to fund the interest costs on 40% of your house. And then you've got the option to buy that off the government later on down the track. So quite a good scheme to let people or help people get into the housing market. The fact that Devika's point is, is this just increases demand and makes it more accessible, but doesn't deal with the supply issue. So we will put pressure on housing in certain areas and there's limits as well. Depending on where you are, the value of the house, so depends on states and regional versus cities and whatnot, but quite a good scheme there for young people to help enter the housing market there. May we go to the next slide? Not good news for age pensioners or retirees. There wasn't any changes there announced, so no assistance with the cost-of-living. So you miss out, unfortunately, this year. And thankfully for my job is there's no changes to superannuation. This is an area that they've been tweaking with and continuing to tax more and more over the years. So it does make my life a little bit easier, but we also have got no further news on the 30% tax rate that was going to apply on superannuation for balances over $3m. So that one's a bit in limbo land at the moment. One of the points I wanted to raise was although it was not in the budget, new aged care entrance, there was an act passed called the Aged Care Act. It was passed and comes into effect on 1st of July, 2025. Now this is massive if you've got a family member that's going to be looking to enter aged care. Not many people are talking about it sort of got slipped under the radar and it's going to cost hundreds of thousands of dollars extra in aged care costs should your family member enter aged care after 1 July versus pre 1 July. So there's a bit of a rush at the moment to get the loved ones in aged care if you know, they're at that stage. Some of the costs is the, there's a 2% retention amount. A retention amount on the lump sum accommodation payment. You may have heard that people have to pay a bond to aged care. In the past, you used to get all that money back. From 1 July, they're going to start to keep some of that money each year for up to five years. And those payments at levels have increased as well. So those levels will increase to about $750,000. And if an aged care home wants to charge more than that, they're going to have to ask for approval. You know, increasing what they can ask for and then keeping more of the money from new applicants is going to be quite expensive for a lot of households. And then there's also extra contributions called the hoteling contribution. So another $4,500 payable each year. And then they've increased some of the fees that are means tested. So the more money you have, the more you pay. So huge costs here that... might be exposed to some of these new entrants in the aged care sector. We go to the next slide. One of the benefits that we've seen proposed is, or, you know, talked about is everyone's getting tax cuts. And what you can see here in these slides is the thresholds on the left hand side of your income that you earn and what the tax rates were in 2024-25 and 2025-26. And you can see there the bracket of the $18,000-$45,000 current tax rate of 16% that will be dropping down to 15% and 14% over the year. So everyone gets a 1% and 2% tax cut. This equates to up to $10 a week for most people. So barely going to make a difference with the cost-of-living pressures for most households. People are saying it's up to $50 a week, but that's taking into account previous tax cuts that were proposed and going to happen. And you may recall that the stage three tax cuts were also clawed back. You know, take from one hand and they're giving somewhere else some minor changes there and obviously a pre-election budget. So, vote buying exercise. The final change there on the next slide is the Medicare levy rebates. So low income threshold, sorry. So for here, what you can see is the Medicare levy is effectively the 2% that they charge on your taxable income if your income is over the thresholds below. So for single people in the past, if you weren't over $26,000, any income above that you're paying 2% as a Medicare levy, that's increased to $27,000. Families are increasing up to, I think there's a mistake on that slide, but $46,000. And then what happens is as families with dependent children, those thresholds or limits increase by about $4,200 per dependent child or student, and that's up from about $4,000. Small little benefits there, I guess, not paying that Medicare levy on some income. Thank you, Andrew. Terrific, thanks Rob and thank you to the panel who did actually manage to catch a number of the questions that we'll put through in their presentation. So thank you for a very interesting, engaging presentation. We now do have some time for Q &A and we would also ask you to complete a quick survey during that Q &A so that a link is being posted up in the chat now to that survey. If you could follow that link and complete our quick survey, it would be really appreciated. So first question for you, Devika. And one I think is a really good question, really interesting is, will the migration handbrake slow growth and increase wages over time? In the short-term, maybe not, but in the long term, yes, because Australia unfortunately has the problem of an aging population as well. And what the migrants have essentially been doing is they have been filling those gaps. Now, if you are going to stop your one source of young expat, community coming into the country who are essentially filling all these job gaps. To give you an example, most of the international students who enter Australia are engaged in the gig economy. They do all these jobs while they're studying, particularly in the hospitality and the retail sector. They fill those little gaps which are extremely essential. Secondly, when they pass out of Australian universities, they have the skill sets required to fit into the cultural requirement of an Australian organisations because universities and institutions, corporations are fairly aligned in the skill sets that universities offer students and they come out with and the skill sets that these firms are looking for. Given that we are not getting... the kind of student cohort into universities and they choose to go more into apprenticeships, go more into the field of becoming trades persons. We are having this problem of skill set shortage, which is being filled by all these immigrants who are entering Australia by way of pursuing their higher education or by way of skilled visas. So in the short-to-medium term, it will not potentially cause any harm to our growth metrics because still we have local Australians who are engaged in the workforce. But as that population ages and as the change of guard happens, if we do not have young Australians pursuing higher education in Australian universities, the only way to fill those gaps is by inviting people into Australia. And in the long term, it's definitely more detrimental than beneficial. Terrific. Thank you, Devika. And Liam, one for you here on tax policy. And I'm not sure if you can answer it in terms of the politics, but do you think the Liberal Party will be brave in their budget reply and announce reforms to the tax system, such as increasing GST to 15%? It's a nominated level here, along with reducing new income tax, or do think we're just going to see more of the same and a real lack of any tax reform action on either side. On the point of GST reform, both in terms of rate and base, I think it would certainly make sense. We're well below the OECD average rate of around 19%. And there's obviously scope to broaden the base and there are means to compensate lower socioeconomic demographics who might be disadvantaged by that. I would be surprised if that forms part of the opposition response. Although I did see this morning with respect to income tax rates, the shadow treasurer... The cut, sorry, was basically saying, you know, it's only 70 cents a day. It's insufficient. It's a, you know, pre-election bribe and the personal income taxes will always be lower under the coalition. And as a result, there's been some speculation that, you know, there may be an announcement in that respect. And it's perhaps implicit in that statement that we might see something from the coalition around income tax rate cuts. Okay, let's look forward to seeing that. Rob, this may be a good one for you, there are some there for individuals and families. It doesn't seem to be much for charities or not-for-profit groups. I didn't see too much on not-for-profits charities and like we said age pensioners so I'm very targeted at the younger Australians and lower household incomes this year so yeah pretty quiet budget but this year. And there's also really nothing there in small business grants either. So very quiet in those areas. There's no mistaking that this is a budget aimed directly at votes. So they mustn't feel that there's many votes in those two areas. Devika, if we can come back to you and the question on productivity. And while the budget is not a big spending budget in the uncertain Trump environment, Had the government missed a bit by not reflecting any productivity improvements or cost saving measures? This is a big election pitch for the opposition at the moment. What are your views around productivity opportunities? Okay, that's actually a great question. And I think we have to look at multiple data points to answer this. So the biggest problem that Australia faces is that services cost is extremely high. We are all aware that when we look at inflation metrics, goods prices are falling a lot faster than services and services prices are closely linked to the labour market and the wages that need to be paid to them. A simple example would be if we call a plumber to fix a small leak, it is quite a significant cost for people, and it just spirals out of control. That's a very basic example, but service costs in general in Australia are fairly high compared to the kind of service that is given or the size of the task that is expected to be worked out. Now, when the service costs are so high, it is a very difficult job for the government to actually come out with productivity enhancement initiators. What are they going to say? They can't just go out and say that, no, no guys, we are not going to be paying you higher wages, that no, the firms need to slash back wages. That's not what any government would do. So the challenge lies with... Businesses taking the initiative more than expecting the government to come up with something. I think how the government can contribute here is by giving perhaps some kind of tax incentives for businesses who are investing in upskilling their existing workforce. For example, a good way to improve productivity, the fastest way to improve productivity is by adopting AI. A person, let's say consultants like you and me, We usually tend to take four hours to write a report, do a deep dive, but if we incorporate AI into our day-to-day tasks, we are able to get ahead and perhaps complete that task in about two hours time instead of taking four hours. So you have two hours to dedicate elsewhere, which naturally improves your productivity. Now the challenge here is, do you have access to those kinds of softwares? Do you have the right... people with the right skill sets who are able to take advantage of something as basic as AI. Of course, AI is not the end game because even AI needs to be trained. And for AI to be trained, you need to have that existing skill set in your workforce who are able to bring the AI up to speed to help it understand your business requirements and then help you deliver by way of improving your productivity. So the challenge here is that the government cannot call these call out the shortcomings that are existing in the Australian workforce. And it is long-term and it's a very difficult conversation to have, which I don't think any of the parties would be willing to touch upon just before an election. So if this is something that we cannot hear from the government, this is something we need to take in our stride and do it ourselves. It is tough in the short-term, it's going to be expensive, it's going to be difficult. But in the long term, it definitely is beneficial to improve revenue generation and definitely improve your productivity. Terrific. Thank you, Devika. And Liam, this is one that's close to my heart. Any help for tax practitioners going forward? We seem to get more regulated every day. Yeah, unfortunately not. The only sort of potentially relevant announcement is the modernisation, the registration framework for tax practitioners, which may yield some incremental efficiencies. Otherwise, this is increased enforcement to complement recently increased regulation. And that's really just to, you know, restore community confidence in the profession. Yeah, excellent. Somebody else is asking, can you please elaborate on why tech tax practitioners are losers in the budget? Yeah, that's a good question. The rationale for including that reference is effectively that tax practitioners, those who are doing the right thing will be subject to additional scrutiny and compliance costs as a result of these measures. But as I sort of alluded to before, there are good reasons for these measures being introduced in the increased enforcement activity. Okay, thank you. And Rob, what are the major changes for sole traders? Maybe I'll handball that one to Liam. It's probably out of my field, but I didn't see anything there that were affecting the small trade, the sole traders. Maybe that instant asset write-off is probably going to affect them a little bit, but maybe Liam can answer that one better. agree with that. The only potentially relevant measure or rather omission would be the small business instant asset write off. Haven't seen too much in terms of relief or any other measures relating to sole traders, unfortunately. Okay, and terrific. Now, we've got a question there on the impact on rare earth minerals markets and lithium, but I think we're very silent in this budget on that. We have seen it in previous budgets, so we'll leave that one go. And we've got time for one last question here, and we'll put that to you, Devika, in that is, what's the general feel of the capital investment initiatives? Has there been a shift in prior investment sectors like health to other areas now. I think health still continues to remain the focus. Last budget we saw that there was a lot of debate on what happens with investment in the NDIS space and it got quite controversial. So this budget has been fairly muted in the sense of any big bang reforms or any big bang investments in something that might just completely alter how different sectors perform. It has been very centrally focused on just individuals, households, just managing consumption and being able to just show the government as being concerned, supporting growth, supporting consumption. So I would say not much has been seen in this budget, per se. And perhaps that's partly also because of the backlash that came from the reforms that were outlined in the budget in May 2024, I think the government just wanted to play it safe. So not something materially seen, but I'm happy to take a look again and get back. All right, terrific. Thanks, Devika. And we've had one last question squeeze in and I'm taking the family overseas for holidays at the end of the year. So I'd like to know what is the impact on the Australian dollar since the forecast of commodity prices is downwards? Yeah, so naturally once the demand for a commodity prices starts weakening, particularly from our largest trade partner in China, there's a good chance that our currency also starts depreciating because there's less demand there in the external sector. Now when that happens, there are two things. We are also importing inflation and for us to go out and go for overseas travel, that is also a bit concerning. However, having said that, there's another element in play when it comes to currency metrics. So we've got the trade weighted index, which is directly linked to commodity prices and demand for commodities. And we've also got the exchange rate that is directly linked to the United States dollar. Now broadly, when we look at the central bank policy decisions, we are aware that the Federal Reserve is now on the back foot and is reconsidering its policy easing path. Now, what that means for the RBA is that it doesn't move in lockstep. It definitely does not, but it does have to be mindful of how the US Federal Reserve is moving. So the RBA is going to be looking at what the US Fed does very closely. Now, the trick here is to make sure that the interest rate differential between both the currencies is not significant enough to completely depreciate the Aussie dollars per chasing power. So if the United States Federal Reserve does decide that, we do not need to ease any more. We'd rather be safe than be sorry, particularly when the dynamics around Trump's policy decisions are so uncertain. What the RBA would be thinking is, okay, domestically, headline inflation is coming down, but core inflation is still above the target range of two to 3%. The labour market is materially tight. So what does it mean for us? Also, there's a lot of global uncertainty, particularly more inflationary than deflationary. So let us also take a step back and hold back on cutting interest rates too fast, too soon. Otherwise we risk completely reversing all the progress we made on our inflation battle to date. And this is something Governor Michelle Bullock has been quite vocal about. So there's a good chance that if the RBA is very measured in its easing cycle, then the Aussie dollar will still hold up fairly well. And perhaps all the weakness that is materialising from the trade weighted index of the Aussie dollar is somewhat offset by our exchange rate with the United States dollar. So broadly, it should not completely depreciate our currency and hopefully people are still able to have a good international trip. But perhaps it won't be as lucrative as it was last year when we saw so many Australians going to Japan because the yen was taking a beating and the Aussie dollar was extremely strong. So maybe going to Bali would be a good option. Thank you very much, Devika. And thank you to all the panellists. That's all we have time for today. I encourage everyone to follow the link and complete our short survey. And on that page, you'll also find our free report that has more detailed information on the budget. On behalf of RSM and the team, we had our team up overnight producing our reports. There's a team of 20 or so of RSM staff. Thank you very much. And thank you for everybody who's attended our webinar. and we'll talk to you again next year when the next budget's out. Thank you.