The Federal Treasurer, the Honourable Jim Chalmers MP has handed down the 2025-26 Federal Budget after plans to sacrifice the Budget to the election cycle were blown away by Tropical Cyclone Alfred.
With the federal election expected by May 2025, this Budget focuses on targeted spending for individuals and families as opposed to significant measures for business or substantial corporate tax reform.
Ban on non-compete clauses
The largest measure relates to a ban on non-compete clauses for workers earning less than $175,000 per year. The Productivity Commission has estimated that this reform could result in an increase in GDP by $5 billion a year, and research indicates that workers could experience wage growth of 4% by removing this barrier to flexibility in employment. Childcare, construction, and hairdressing are industries identified where it is claimed that workers are being adversely affected by these clauses. A Competition Review run by Treasury reported misuse of the clause with workers on minimum wage being threatened with legal proceedings if they seek to switch jobs.
Conversely, industry organisations have warned that the proposal will serve to discourage Australian businesses from investing in employees and providing training which puts at risk their intellectual property.
Support Australia: Buy Australia and Front Door
Elsewhere, the Federal Budget pledges $20m to support Australian produce through the Buy Australian Campaign, and there is industry specific funding for the health, education, metals and the construction sectors in particular. Given the uncertainty on the global economic and geopolitical landscape, in particular the Trump administration’s approach to tariffs on metals, this funding may prove critical to supporting our export market.
As well as bolstering exports, the government is to establish a new Front Door for investors to attract overseas capital investment in Australia. The Front Door is intended to serve as a single entry point for overseas investors to connect priority projects with funding from across the globe. It is however worth noting, that Net Overseas migration is projected to fall from 435,000 in 2023/24 to 225,000 in 2026/27. For industries needing specialised skills this may present a challenge in ensuring the necessary skilled labour force is available.
There has been a deferral of the previously announced non-resident Capital Gains Tax measures to 1 October 2025 at the earliest, and there has been a reaffirmation to amend the Managed Investment Trust (MIT) rules following the Commissioner’s view contained in TA2025/1 and the press release from the Assistant Treasurer and Minister for Financial Services (on 13 March 2025).
Energy efficiency upgrade
For small and medium sized Australian business, there is to be some easing of cost pressure with energy bill relief for around 1 million eligible small businesses, and grants totalling $56.7m are being founded to enable and facilitate energy efficiency upgrades for small and medium enterprises.
Investing in cleaner energy for Australia
The 2025–26 Federal Budget also includes significant investments aimed at accelerating Australia’s transition to cleaner energy and supporting low-emissions industries:
- $2 billion over 19 years from 2024–25 will fund Green Aluminium Production Credits. These production-based grants will assist eligible Australian aluminium smelters in transitioning to renewable electricity before 2036, with support delivered over a 10-year period.
- $1 billion over seven years from 2024–25 has been allocated to establish the Green Iron Investment Fund. This fund will provide capital grants to support green iron projects, enabling producers to either establish new or transition existing facilities to low-emissions operations within Australia.
- An additional $2 billion will be injected into the Clean Energy Finance Corporation (CEFC) to enhance its capacity to invest in renewable energy, energy efficiency, and low-emissions technologies across the country.
Instant Asset write-off for businesses
The Government reconfirmed its commitment to deliver the previously announced measure to temporarily extend the $20,000 instant asset write off threshold by 12 months to 30 June 2025.
The measure is contained in Schedule 4 to the
Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2024 which is currently before the House of Representatives.
The Coalition have pledged the make the measure permanent alongside announcing plans to allow small business to claim up to $20,000 for business meals and entertainment (excluding alcohol), although it is unclear what the proposed Fringe Benefit Tax (FBT) treatment will be.
Auditing
The Australian Taxation Office is receiving $999 million in additional funding to expand its audit activity, particularly on multinationals and other large taxpayers.
2025-26 Australian Federal Budget Summary for business owners
While the 2025–26 Federal Budget includes targeted initiatives across clean energy, exports, and selected industry support, its broader impact on the Australian business landscape appears limited. Measures such as the energy efficiency grants and reforms to non-compete clauses may offer relief or opportunity for some sectors, but overall, the Budget stops short of delivering widespread incentives to boost business confidence, growth, or investment. With ongoing global economic uncertainty and domestic cost pressures, many businesses may find the 2025 Federal Budget light on the comprehensive support needed to navigate the challenges ahead.
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Other contributing authors:
Jason Matchado, Partner, Tax Advisory
Vanessa Menezes, Grant Lead Manager, Tax Advisory
Jordan Edwards, Senior Consultant, Tax Advisory
