Now that the 2025 federal budget is officially announced, HR, payroll and compliance teams are looking at how these changes will potentially reshape their day-to-day operations. Whether it's updating tax strategies, adjusting policies, or navigating new regulations, it’s possible that the impact may be felt by businesses and workers alike. The budget touches on everything from taxes to labour market policies, creating a ripple effect that may affect both businesses and workers. While acknowledging this period of uncertainty while awaiting the election, it’s important that we are paying attention to these prospective changes.  

So, what’s the new reality for HR and workforce management in light of these changes? Let’s break down the key updates and explore how they may affect your teams.  

The election’s impact on the budget

Before diving into the changes, it’s important to acknowledge the looming federal elections. Given the likelihood of an election over the weekend, it’s unclear whether these measures will take effect immediately – or at all. The election outcome may go one of three ways:  

• If Labor retains power with a majority, measures will progress quickly.  
• If the Coalition win power many measures will not proceed.  
• If we end up with a minority government, as the current polls predict, expect measures to change as they are negotiated to pass with cross benchers.  

The one thing that is certain is that we won’t have clarity until sometime in May once the election day result is known. Let’s take a look at what we do know so far. 

Key federal budget changes in 2025

Let’s look at the major changes that will impact HR, payroll, and compliance teams:

1. Personal income tax cuts 

From 1 July 2026, the tax rate on income between $18,201 and $45,000 will be reduced from 16 to 15 percent. This reduction will further decrease to 14 percent by 1 July 2027. 

Employees earning over $45,000 p.a. will benefit from a $268 tax cut in the 2026-2027 financial year and another $268 (totalling $536) in the 2027-2028 financial year. Employees earning between $22,866 and $45,000 will receive less benefit.  

Note: Individuals earning under $22,866 do not pay income tax.  

2. Medicare Levy Low-Income thresholds 

The thresholds for the Medicare Levy Low-Income would be increased so low-income individuals would be exempt from paying Medicare Levy until they earn a higher amount. 

• The threshold for singles will increase from $26,000 to $27,222.  
• The family threshold will increase from $43,846 to $45,907.  
• The family income thresholds will increase by $4,216 for each dependent child or student, up from $4,027. 

This will only impact employers if an employee provides a Medicare Levy Variation Tax Declaration (NAT 0929) 

3. Higher Education Loan Program (HELP)

Existing HELP, HECS, STSL debts will have 20% wiped from them at the point the legislation passes. Additionally, the amount an individual will be able to earn before they have to start paying back their debt will increase from $54,435 to $67,000 for the 2025-2026 financial year. The additional thresholds at which the rate of repayment changes will also increase but was not noted in any of the budget papers.

Given this would be due to commence from 1st July 2025 if the passing of this measure doesn’t occur quickly after the election there may be a requirement to update tax tables for HELP / HECS after the financial year had started.

4. ATO Tax Integrity Program 

An additional $50 million dollars has been allocated over 3 years to chase unpaid tax and superannuation liabilities. This coincides with the expected introduction of Payday Super during which there will be a period where a number of employers may be non-compliant. 

5. Increasing workforce participation and movement

Childcare access will be changed from an activity-based test to a guaranteed 3 days a week. The aim is to increase primary care givers participation in the workforce. This comes with significant funding to build new centres in areas of need and increase early childhood educator wages.

To allow employees more freedom “Non-Compete” clauses will be banned from employee contracts where the individual is earning less than the High-Income Threshold. 

6. Changes to the key apprenticeship program

Apprentices in the Housing and Construction industries may be eligible for $10,000 incentives over the course of their apprenticeship while employers who choose to employee apprentices in these sectors may receive $5,000. 
 
 

How the 2025 federal budget affects HR and payroll practices

So, what does this mean for HR, payroll, and compliance? While there may not be huge amounts to get excited about it’s still important to make sure you stay one step ahead.  

Here’s a breakdown of some things to keep an eye out for:  

• Personal income tax: This will mean recalculating employee tax withholding and ensuring updated tax tables are implement timely and as a result payroll should be ready for changes in employee net pay and the questions that follow. 
• Medicare Levy: Employers may need to adjust their payroll systems if employees submit a Medicare Levy Variation Tax Declaration (NAT 0929)
• ATO Tax Integrity Program: Employees should be prepared for increased scrutiny in the coming years which could mean more audits and checks for compliance teams
• HELP: This 20% reduction in HELP debt may lead to an increase in the disposable income for employees. HR and payroll teams may see a rise in employee net pay, potentially requiring adjustments to tax tables. Don't forget: employees will start repaying their HELP debts later, which could also impact their take-home pay.
• Childcare access: With guaranteed days and the removal of non-complete clauses for lower-income earners, steps are being taken towards a more dynamic and flexible workforce by reducing barriers to workforce participation
• Apprenticeship program: For those in the housing or construction sectors ensure your HR team are prepared to apply for these incentives to help attract talent and reduce costs. 

What next?  

As we head into the election period, the 2025 budget signals potential shifts in economic policy. While the immediate impact on HR, payroll, and compliance may seem moderate, it’s crucial that your systems are ready for any changes that come your way.